How do I pay back my reverse mortgage? Read here to find out how a reverse mortgage is repaid and what your obligations are!
A reverse mortgage is an ideal option for senior citizens who want to remain in their homes but need to tap into liquidate a portion of the equity in their home. A large concern for many senior citizens is how a reverse mortgage is paid back. Monthly payments are not required for a reverse mortgage and it only needs to be paid back in one of the following situations.
The Homeowner Dies
The first situation where a reverse mortgage has to be paid back is when the home owner dies. Upon the death of a homeowner, the heirs of the homeowner are required to sell the home in order to pay off the reverse mortgage. The heirs normally have up to six months to payoff the reverse mortgage. If the home cannot be sold another arrangement with the lender will need to be worked out.
The Homeowner Sells the Home
If the reverse mortgage borrower sells their home which secures the reverse mortgage, then the reverse mortgage has to be paid back. Proceeds from the sale of the home will need to be used to pay off the outstanding balance. The remaining proceeds from the sale will go back to the homeowner or their estate. A reverse mortgage should not come with any prepayment penalty.
The Homeowner Moves Out
If the reverse mortgage borrower moves out of their home, the reverse mortgage must be paid back. A reverse mortgage is intended to be secured by the senior citizen’s primary residence. If the homeowner moves out and into another home by themselves, with a relative, or into a retirement community the reverse mortgage will need to be repaid.
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