A frequently asked question about reverse mortgage loans is, “When do I have to pay it off?” There are several scenarios regarding when a reverse mortgage would have to be paid off. The first would be when the last borrower passes away or moves out for more than a year, so the home is no longer considered their primary residence. If the home is not maintained properly, or the borrower fails to stay current on either their homeowners’ insurance or property taxes, that would also cause the loan to come due for payoff. Under these circumstances, the borrower or their heirs have two ways to satisfy the HECM reverse mortgage loan. They can simply choose to sell the home, pay off the mortgage and keep any remaining balance. If the loan balance exceeds the value of the home at that time, the heirs can sell the home at 95% of the current appraised value, and FHA Mortgage insurance will make up the difference.
The second option is that the heirs refinance the mortgage and either move into the home themselves or turn it into an investment property by renting it out. But one circumstance borrowers don’t have to worry about is outliving a reverse mortgage, because the term of the loan is the youngest borrower’s 150th birthday. To find out more about how reverse mortgages work, call us today.