If you’re a retiree or if your parents are, it’s important to understand that you can use a reverse mortgage for as long as you want. However, there are certain circumstances when you might receive a reminder about your reverse mortgage coming due.
Today, let’s explore what happens when a reverse mortgage comes to an end.
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You can pay off your reverse mortgage and still keep your house for any reason you want.
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About 14% of people are accessing cash from their homes through loans like home equity loans or reverse mortgages.
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If your loan balance exceeds your home's value, you or your heirs might not need to cover the remaining amount.
Things to Remember
What Happens When a Reverse Mortgage Runs Out?
While it’s true that you can use your reverse mortgage funds for as long as you want, there comes a day when repayment is necessary. This day varies for each individual. When the loan comes due, it signifies that the reverse mortgage has reached its end.
This occurs in circumstances such as moving out, selling your home, or upon your passing. So, when a reverse mortgage runs out, here’s what typically happens!
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Available Options for Heirs
If there's still equity left in the home, your heirs usually have six months to either sell the home, refinance the loan to pay it off, or sign the home over to the bank and walk away.They might also request extensions if they need more time.
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If there's zero equity
If there's no equity remaining in the home, heirs can choose to sign it over to the bank or obtain a new loan for 95% of the current home value, with the lender accepting it as full payment.
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Mortgage Insurance Protection Safeguards Heirs
Reverse mortgages come with mortgage insurance, which protects the lender in case the loan balance exceeds the home's value. This ensures that heirs are not held responsible for any shortfall.
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Heirs Can Keep the Home
Even if the loan balance surpasses the home's value, heirs can still keep the home by paying 95% of its value at the time of the borrower's passing.
Work out your options with a loan officer!
Final Thoughts
It's crucial for retirees and their families to gear up for the time when funds run dry. By creating a solid budget, exploring extra income options, chatting with a financial advisor, and maybe even downsizing to a cozier spot, you can set yourself up for a smoother ride.
About the writer
Connie Hedrick
Reverse Mortgage Expert