When Do You Pay Back A Reverse Mortgage
A reverse mortgage does not require you to make any monthly repayments until the loan comes due. This generally happens when you do any of the following:
- Pass away
- No longer use the home as your primary residence
- Transfer the title of the home into someone else’s name
- Default on any of the terms or conditions of your reverse mortgage
Consult your contract to see what might make your loan come due.
These maturity events may come about in unconventional ways, so be sure to think your actions through ahead of time. For example, if you plan to travel for more than a year, your lender may execute the early payback clause. Likewise, your permanent residence may change if you ever move to an assisted living facility or nursing home. Your reverse mortgage could even come due if you fail to keep your home in good condition or pay your homeowners insurance or property taxes on time.
However, if you pass away and your spouse is not a co-borrower of the loan, they may be able to continue living at the property without having to repay the loan until it otherwise reaches maturity. If you have a HECM from on or after Aug. 4, 2014, the U.S Department of Housing and Urban Development’s non-borrowing spouse rule helps protect your spouse as long as they meet certain criteria. Earlier HECMs or proprietary reverse mortgages may not have these protections for spouses, though.
Homeowners Frequently Ask Can I Sell My Home With A Reverse Mortgage
Borrowers can repay a reverse mortgage at any time without penalty. So the answer is: Yes, you can sell a house with a reverse mortgage at any time, just like on a traditional mortgage.
When you sell your reverse mortgaged home, you must pay back the mortgage balance and the lender will close your loan account. You hold the remaining home equity.
Have Family Move In With You
As long as youre living in your home, you generally dont have to repay the reverse mortgage. As previously mentioned, if youre having difficulty with maintaining your home or running errands, consider asking your family for help. If youre thinking about moving in with family, perhaps have them move in with you instead.
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How Does A Reverse Mortgage Work In Canada
Access up to 55% of the Value of Your Home the Process is Easy!
Find out how much money you can get with a free estimate
Our consultants and specialist will contact you to verify your information and answer question.
Receive the money you need in one lump sum or multiple installments
There are no monthly mortgage payments. The full amount becomes due when you are no longer in the home.
Can You Walk Away From A Reverse Mortgage
The answer depends on what you mean by walk away:
- If you have a reverse mortgage on your home and you move away permanently or abandon the home, the loan will likely become due.
- If the reverse mortgage in question comes due and you ignore the repayment, the lender will likely foreclose on the home and sell it to get their money back.
So, you can walk away from a reverse mortgage, but there are significant downsides. Evaluate your situation and consider your other options before walking away.
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Timeframe To Vacate Home After Reverse Mortgage
I can answer your question about possible foreclosure issues regarding the loan, but as far as the possible timeframes and rights of a third party vacating the property if the reverse mortgage ends in foreclosure sale, you would need to consult with an attorney in the area.
That would be a legal issue separate from the reverse mortgage and there are many factors that can play a role in eviction that I simply cannot answer for you.
But about the timing of the foreclosure sale, the lender can postpone a foreclosure sale if they so choose.
Celink is the lenders/HUDs servicer and they are acting on behalf of the lender they would not make that decision on their own.
That is why there are delays at times, they really do need to obtain approvals for certain actions.
But if the buyer is close to closing at the end of the month, he should communicate with Celink and, while I cannot commit anything for them, I am fairly confident that they would be willing to grant a small extension to allow for the loan to close.
In fact, I would say that it would be a very good idea for him to give Celink regular updates as the loan progresses so there is no question of his intent or his ability to qualify.
You need to remember that a good lender CAN close a loan between now and December 30th if the borrower qualifies .
I would believe that unless there is some legal reason to extend the time, things would move quickly from that point.
Why Sell A Home With A Reverse Mortgage
The act of selling a home with a reverse mortgage is typically triggered by what lenders call a maturity event. Anytime a maturity event is reached, your reverse mortgage comes due. You can trigger a maturity event yourself . Or a maturity event might be reached automatically, due to the homeowners death or illness.
Maturity events that require reverse mortgage payoff:
- Choosing to sell
- Illness that requires a move into assisted living or a nursing home
- Unpaid property taxes or HOA fees
- Home in disrepair
If youre being forced to sell due to a maturity event, stay in contact with your lender to prove youre actively trying to sell your home. If your lender thinks youre not actively trying to sell after a maturity event, they may take action, like starting foreclosure proceedings.
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Reverse Mortgage After Death: What Heirs & Family Must Know
It seems that one of the most popular questions we get is:
What happens with my reverse mortgage and my home after death?
The reverse mortgage is intended to be the last loan that borrowers will ever need, so this is a question many homeowners and their heirs have on their minds as many of them intend to keep the loan and the home for life.
If they do get a reverse mortgage and it does enable them to live in their homes without paying a mortgage payment for the rest of their lives
Most borrowers know that the benefit amount or eligible Principal Limit is based on the age of the youngest borrower .
Those who have done their research and know this fact, are concerned about any changes to their loan when one borrower, older or younger, passes first.
They want to know can the remaining spouse remain in the home, will there be any changes to the loan as a result, how does this affect the heirs, etc.
And in fact, all borrowers with heirs are always rightly concerned about what happens to their homes and the mortgage upon their passing. The first thing to ease everyones concern is that once the loan closes, the terms do not change.
If there are more than one borrower on the loan and one predeceases the other or must leave the home, regardless of the ages of the remaining borrower, the terms are not changed.
How Long Does It Take To Foreclose On A House With A Reverse Mortgage
The foreclosure timeframe for a reverse mortgage is the same once the Notice of Default has been filed as with any other loan as prescribed by local laws.
The actual time it takes depends on the state in which the property is located but can take as little as 150 180 days in a Trust Deed state from filing to over a year in a judicial foreclosure state that must go through a court foreclosure.
Any individual, borrowers or their heirs facing a foreclosure action should seek legal assistance to determine the foreclosure laws in their area and their rights and obligations under the law.
Reverse Mortgages Arent Much Different From Traditional Loans
Exactly as the name implies in reverse of a traditional or forward mortgage.
There are no monthly payments of principal or interest due on a reverse mortgage.
The loan accrues interest and other charges that are not due and payable until the last borrower permanently leaves the home .
So instead of you paying a monthly payment to reduce the amount you owe on the loan, you receive funds from the loan and your balance owed grows over time as you accrue interest and borrow money.
And while there is never a payment due on a reverse mortgage, there is also no prepayment penalty so borrowers can choose to make a payment in any amount at any time without penalty but are not required to do so until the home is sold or they permanently move out of the property.
However, the borrowers are still responsible for payment of taxes and insurance and for the upkeep on their homes.
This is the same requirement as on a forward mortgage and not paying these assessments is a default under the terms of the loan so this is an important thing to remember.
How To Avoid Outliving Your Reverse Mortgage
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Lea Uradu, J.D. is graduate of the University of Maryland School of Law, a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, Tax Writer, and Founder of L.A.W. Tax Resolution Services. Lea has worked with hundreds of federal individual and expat tax clients.
When Selling Your House As Is Becomes An Issue
Selling your home with a reverse mortgage is significantly easier if your property has increased in value over time. In this case, youll have enough equity you can use to pay off the loan, and the situation has significantly less red tape.
Its a bit trickier if your homes value has dropped over time to a value less than what you owe the lender. For example, your real estate broker cant list a property for a price that is less than what you owe your lender. The only way out of this complication is to make up the difference at the time of the sale. Unfortunately this means walking away with less money in your pocket.
Is It Possible To Sell A House With A Reverse Mortgage
Homeowners frequently ask if they can sell their home with a reverse mortgage. The answer is yes! The FHA reverse mortgage program does not prohibit the sale of a home with a reverse mortgage . . . even if the loan balance exceeds the appraised value. Buried in all those papers at settlement is a statement that says the reverse mortgage is a “non-recourse” mortgage. That means that even if the mortgage balance exceeds the sales price, no additional money is required to pay off the loan balance in full. For example, let’s say the owner/borrower received $200,000 over the borrower’s lifetime and the house is now under water , and the house has a buyer at $100,000, the balance of the mortgage will be forgiven. Actually, the reverse mortgage lender will accept 95% of the home’s appraised value, or the full loan balance, whichever is less.
Before selling a home with a reverse mortgage, contact the lender to find out the loan payoff. The lender will also explain the selling procedure. If the home value is greater than the loan payoff. The difference between the sales price and expenses will be disbursed at settlement. Keep in mind that the loan balance increases each month. Which means less profit when a sale occurs.
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What To Consider Before Selling A House With A Reverse Mortgage
Selling a home with a reverse mortgage is not a simple decision. There are a number of factors that could complicate matters. Here are a few things to consider.
How long have you had the reverse mortgage? These loans come with a lot of fees so you may have burned a lot of your home equity without getting much in return if you recently took out the reverse mortgage.
Has the property lost value? If your home has lost value and is worth less than the balance owed, it can get complicated quickly. This can prove downright difficult, said Kelly Parks, a real estate broker with Paris Gibson Realty in Great Falls, Mont. Ive personally spent hours emailing and calling reverse mortgage lenders to find out the status of an appraisal in order to be able to actually list a property. Remember, though, you wont need to pay more than 95% of appraised value of the home.
Do you have somewhere else to live? One of the benefits of reverse mortgages is that you get to stay in your home as you age. If youre selling, youll obviously need somewhere else to live. Be sure that your new home will be affordable and suitable for you as you get older. Keep in mind that paying off your reverse mortgage can reduce the amount of money you have to pay for nursing or assisted-living care.
Todd Veinotte Asks About Common Mortgage Misconceptions
Todd Veinotte: Alright, its Financial Literacy Month and we are having some special programming with our mortgage guru, Clinton Wilkins, and we are taking your calls as well. Give us a buzz if youve got a mortgage related question: 902-405-6000 or 877-801-8255. Thats the way to reach us again, 902-405-6000 or 877-801-8255. Clinton what are a couple of the biggest misconceptions that you hear consistently out there when it comes to mortgages?
Clinton Wilkins: I think a lot of it has to do with credit. You know, I think a lot of borrowers think that they can never get a mortgage or, you know, if theyve had some credit issues in the past that theyre just, you know, in purgatory and they can never get to that next level. Theres always a solution, Todd. And we see a lot of borrowers that are existing homeowners potentially that have had some challenges in the past. And theres always a solution there, especially in the more urban areas.
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What Are The Cons Of A Reverse Mortgage
Remember that old saying if it seems too good to be true, it probably is? Well, that applies to reverse mortgages too. Some of the disadvantages of taking out a reverse mortgage are:
- Reverse mortgages can significantly increase the amount of debt you carry, which can result in you having less to leave to your family, or other benefactors of your will
- Reverse mortgage interest rates are much higher than typical mortgage rates
- As you borrow more and more equity, interest starts to accumulate faster and faster
- There are only two lenders that offer reverse mortgages in Canada
- Additional setup costs can also add up and are deducted from the amount youll receive
- The only way to get out of a reverse mortgage is to sell your home or pass away
- Youll be subject to a penalty if you sell the home or pass away within three years of taking out the reverse mortgage
- If you pass away, the amount you borrowed plus interest must be repaid within a limited period of time
How Home Sale Proceeds Sharing Works
The provider pays you a reduced amount for the share you sell. How much you get for the share depends on your age.
Terms and conditions vary. The provider may offer a ‘rebate’ feature. This means you get some money back if you sell your home earlier than expected. The amount you get back depends on when you sell your home and how much you got for your sold share. You may also have the option to buy back the sold share later, if you wish.
For example, suppose your home is currently worth $500,000 and you sell a 20% share of the future value. Depending on your age, the provider may offer you $37,000 to $78,000 to buy that share today. When you sell your home, the provider receives their share of the proceeds. Say in 20 years time you sell your home for $800,000. The provider gets 20% of the sale price , minus any rebate .
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The Borrower Fails To Meet The Obligations Of The Mortgage
The terms of the mortgage will require the borrower to pay the property taxes, maintain adequate homeowners’ insurance, and keep the property in good condition. If the borrower doesn’t pay the property taxes or homeowners’ insurance, or if the property is in disrepair, this constitutes a violation of the mortgage and the lender can call the loan due. The lender must usually allow the borrower to cure the default to prevent or stop a foreclosure.
Modified Term Reverse Mortgage
Modified term plans give you a fixed monthly payment for a predetermined number of months, plus access to a line of credit. The monthly payment will be smaller than if you choose a straight term plan, and the line of credit will be smaller than if you choose a straight line of credit plan.
With a modified term plan, you will only receive monthly payments for a predetermined period, but the line of credit will remain available until youve exhausted it. You can avoid running out of money with this plan if you use your line of credit carefully. You can also run out of money quickly if you exhaust the line of credit early on.
A safer choice is to rely primarily on the term payments until the term ends, letting your line of credit increase, and only then rely on that line of credit. If you never use the line of credit, you might have enough equity to give you future flexibility to sell your home, pay off the loan, and move.
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