Generally the reverse mortgage is a loan which is specially designed for senior citizens aged at least 62 years or more. In this kind of mortgage the home owner will earn a steady income, based on equity of his own house. Here the home owner can opt for any kind of payment like bulk amounts or monthly payments. But in some of the countries reverse mortgage should be the only mortgage on house or property.
Is there any possibility of defaulting on reverse mortgage?
Yes, it is possible to default on reverse mortgage. Declaring bankruptcy, abandoning a house or committing fraud would account for default. A reverse mortgage can lead to default, if the home owner doesn’t pay tax or insurance related to house or property. In addition the mortgage loan could be terminated for numerous reasons like government take over, or government condemnation.
What happens if a senior citizen defaults on his reverse mortgage?
In case the senior citizen defaults on reverse mortgage then his monthly payments will stop being issued from the lender. Here the lender would stop giving the payments to save himself – or the company – from further loss. There is a possibility of legal action being taken against a senior citizen. After the judgment is approved by the jurisdiction court, the house will be sold to clear the debt. In some regions the home owner should also reimburse the expenses taken on by the lender that are different from paying off the outstanding loan amount.
In addition the credit score of the home owner will have a noteworthy impact after defaults on reverse mortgage. A bad credit score will make it difficult for a home owner to take advantage of other types of loans from a lenders or banks.
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