How do you repay your reverse mortgage loan? Will your heirs stand to lose everything because you suddenly pass without having your reverse mortgage loan repaid? We are going to answer those questions and tell you more about how reverse mortgage loan repayment works.
A reverse mortgage is unlike the conventional loan, where you have to pay them back monthly from the word reverse. With a reverse mortgage loan, you receive money monthly or in a lump sum if that is what you prefer. And you repay the loan in one go when the loan matures.
When does a reverse mortgage loan mature?
A reverse mortgage loan matures when the following happens:
- The borrower dies.
- The borrower moves to another home permanently (nursing home, vacation home, and any transfer that will last for more than 12 months consecutively.)
- The borrow sells the home.
- And it could also happen if the borrower defaults on the loan terms and not being able to maintain the upkeep of the home.
So if one or more of those listed above happens, that is the time that your reverse mortgage loan is deemed due and payable.
How can I repay my reverse loan mortgage?
One of the usual ways of repaying your reverse mortgage is to sell the home. The proceeds of the sale will be used to pay off your mortgage in full. You, or your heirs, will get the remaining equity of your home if there is any. If your balance is bigger than the sale price of your home, if you are FHA insured, in the case of HECM or Home Equity Conversion Mortgage, there is no need to worry because they will take care of the balance of your mortgage. Your heirs will not have any problem with creditors hounding them because of your reverse mortgage.
What if, for sentimental reasons, your heirs want to keep your home after you pass? They can apply for a refinancing of the reverse mortgage and turn it into a conventional mortgage. If other family members are 62 years and above, they can also apply for a reverse mortgage. For more details about reverse mortgages, feel free to contact us.