What happens if I default on my reverse mortgage? Defaulting on a reverse mortgage is guaranteed financial disaster. Learn how to avoid defaulting…
A reverse mortgage, also called a lifetime mortgage, is a loan available only to senior citizens of at least 62 years old. Reverse mortgages are used to release the home equity of the property. In this type of mortgage, the owner of the home makes no payments and interest is added to the property lien. The home owner can arrange to receive monthly payments or a bulk sum. In some countries, a reverse mortgage must be the only mortgage on the property.
Is it possible to default on a reverse mortgage?
Yes, it’s entirely possible. Abandoning the house in question, declaring bankruptcy and committing fraud are all conditions for default. A reverse mortgage can also go into default if the insurance or taxes on the property are left unpaid. The loan can be terminated for other reasons such as condemnation by the government or takeover if they require it for public access such as building new roads.
What happens if I default on my reverse mortgage?
If the senior citizen was under an arrangement to receive monthly payments, these payments will immediately come to an end. This helps to protect the lender from incurring further loss while legal action is taken. A judgment of default will follow and, once approved by the court of jurisidction, the home will be sold to settle the debt. In some areas, the senior citizen is required to reimburse the lender’s legal expenses in addition to paying off their account balance.
What happens if I default on my reverse mortgage with good credit?
Your credit score will take a significant hit after defaulting on the mortgage. This can make getting another loan or acquiring lines of credit very difficult as lenders now see you as a financial risk.
Related posts: