How are reverse mortgages satisfied? Can you pay off a reverse mortgage early without penalty? What if I can not repay my reverse mortgage before I die?
A reverse mortgage is generally satisfied when the home is sold and the full amount is repaid to the lender. However, borrowers can repay the amount at anytime prior to the sale of the home. If the borrower passes away before the reverse mortgage is satisfied, the heirs to the estate can repay the loan amount in full to keep the home or let the home be sold to cover the debt.
Can you pay off a reverse mortgage early without penalty?
In most cases there are no penalties associated with early repayment of a reverse mortgage. The borrower must verify this in their own personal contract. Sometimes there is a clause if the repayment is done in a short period of time. Generally, there are no penalties attached if interest and processing fees are paid. Borrowers must realize that if the reverse mortgage is paid off early they will no longer receive monetary assistance. A new reverse mortgage will need to be taken out if continued financial support is required.
What if I can not repay my reverse mortgage before I die?
When a person dies that has a reverse mortgage on their home, the mortgage company assumes ownership of the house. Heirs to the estate will be allowed a certain period of time to repay the debt and repurchase the home. If the heirs do not wish to accept this offer the mortgage company will place the home up for sale. All proceeds from the sale will be used to repay the debt. However, unless the reverse mortgage is federally insured the heirs will be responsible for any additional money needed to cover the debt. On the other hand, if there is extra money after repaying the debt, the heirs to the estate will receive the entire amount left over.
Related posts: