What Is A Maturing Event For A Reverse Mortgage? Find out here for situations when a reverse mortgage needs to be repaid.
A reverse mortgage is an excellent option for a retired individual who needs to liquidate a portion of their home equity, but do not want to move out of their home. While reverse mortgages do not need to repaid for quite some time, there are several events which call for loan maturity and require repayment.
Death of Homeowner
The first situation which is a maturity event for a reverse mortgage is when the retired homeowner passes away. In this event it is the responsibility of the retired individual’s heirs to sell the home. Usually there is a grace period following death which allows the heirs some time before they are required to sell the home. If they do not want to sell, the homeowners may refinance the loan into a traditional mortgage.
Sale of Home
The next situation which is a maturity event for a reverse mortgage is when a homeowner sells their home. From the lender’s perspective, the reverse mortgage is securitized by the value of the home. If the home is sold, the proceeds from sale must be used to pay off the existing mortgage balance. If the proceeds are not large enough to pay off the balance, the borrower will need to find another way to pay off the remaining balance.
Homeowner Moves Out
The last situation which is a maturity event for a reverse mortgage is when a homeowner moves out of their home, but doesn’t sell. A reverse mortgage can only be taken out on someone’s primary residence. If you move out of your home and into a vacation home, nursing facility, or with a relative, the reverse mortgage will need to be repaid even if the home isn’t sold.
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