Knowing Your Options for Repaying the Loan

Can a homeowner be forced to sell or vacate the home if the money owed on a Reverse Mortgage loan exceeds the value of the home?

No.  As long as the borrower continues to occupy the property as a primary residence and abide by the loan agreement, which states that the borrower is responsible for property maintenance and payment of all property taxes and hazard insurance coverage, he/she may remain in the home for as long they choose.  No deficiency judgment may result from a Reverse Mortgage loan.

Will the borrower’s heirs owe anything to the mortgage lender if the borrower dies before the loan is paid off?

Upon the death of the last remaining borrower, the loan balance which will consist of payments made to or on behalf of the borrower (such as some closing fees and monthly payments or lump sum disbursement) plus accrued interest becomes due and payable.  The heirs may repay the loan by selling the home or by paying off the Reverse Mortgage loan so that they may keep the home.  If the loan balance exceeds the value of the property, the estate will owe no more than 95% of the value at this time which is determined by an appraisal ordered by the servicer of the loan. No additional financial claims may be made against the heirs or the estate.

Can the home be sold to children of the borrower so that the borrower may continue to live in it?

No.  If the property is sold to any other individual, the Reverse Mortgage loan will become due and payable at the time of settlement.  Selling the property for more than the amount owed would result in the borrower receiving the difference in proceeds once the Reverse Mortgage outstanding balance has been paid.  After the Reverse Mortgage is repaid, occupancy arrangements are at the discretion of the new owners.

If the property appreciates in value while there is an outstanding Reverse Mortgage, who is entitled to that money?

With a Reverse Mortgage, only the outstanding balance is legally required to be repaid.  Any money remaining after the mortgage payoff would go directly to the homeowner.

 

To learn more, contact a Reverse Mortgage Banking Representative today!  

 

                                       


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