Can I prepay on my reverse mortgage? Are there any penalties associated with prepaying a reverse mortgage? Do I have to prepay my reverse mortgage?
When you have a reverse mortgage you can prepay the amount due at any time, unless specifically stated in the contract. While it is very unusual to have a non prepayment clause, you should verify before you pay off the reverse mortgage. Federally insured reverse mortgages do not have stipulations preventing you from prepaying the loan.
Are there any penalties associated with prepaying a reverse mortgage?
If you have a FHA insured reverse mortgage you can pay off the loan at anytime without penalties or fees. This consumer protection was enacted to allow customers to pay off borrowed money prior to their death if they so choose. Some private lenders may have a fee associated with prepayment. Generally, if there is a fee attached, it is only within a certain period of time after the initial loan was taken out. These lenders want to ensure that they make a certain percentage of interest off of a transaction, so they will attach a fee if the loan is paid off too early.
Do I have to prepay my reverse mortgage?
You do not, at any time, have to prepay your reverse mortgage. If you are in a valid contract, you can continue drawing money from the account without ever having to make a payment on the loan. The reverse mortgage program was designed to help people in their retirement years live a more comfortable life, not to give them additional payments each month. Unless the contract has been broken by the borrower or the lender, repayment does not need to take place until the property is sold. If you do choose to prepay the loan, you are able to do so without recourse.
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