Paying off a reverse mortgage
Reverse mortgages were created to give seniors options when it came to trying to maintain their home and the increasing costs that come with aging in place. It allowed them to stay in their homes until they moved out permanently or passed away while loans were often paid through the sale of the home. However, there are other potential options for paying off a reverse mortgage.
Paying off a reverse mortgage can be incredibly flexible because it often doesn’t have to be paid back until the home is no longer is in use or the borrower passes away. However, Payments can be made anytime in any amount beforehand if a borrower wishes to lower the interest, or potentially prepare the home for inheritance.
Overview
Reverse mortgages are mortgage loans used to leverage a home’s equity to lead to a more comfortable life in an individual’s retirement years. The majority of reverse mortgages are (HECMs) also referred to as a Home Equity Conversion Mortgage. HECMs are insured by the government and often cited as one of the major benefits of a reverse mortgage. If the amount of the loan is greater than the value of your home, as long as the home sells for less than 95% of the loan’s value the insurance provided by the Federal housing administration will cover the excess fees.
Repayment of Reverse Mortgages are due for repayment under certain circumstances.
Property changes ownership
Either through sale or transfer, if the ownership of the house changes, then the existing reverse mortgage loan must be paid. It is important to note that even if the home is transferred to another family member, this loan must be paid back at the time of transfer.
Change in primary residence
Reverse mortgages must be repaid if the borrower no longer uses the home as a primary residence. If the home is not where the borrower spends most of their time, or if they are living elsewhere for more than 12 months the loan must be repaid.
It is important to note that these clauses are binding regardless of the situations or paying off a reverse mortgage Tulsa circumstances regarding an absence including temporary hospitalizations or health care needs.
Owner Passes away
Reverse mortgages must be repaid upon the borrower’s passing. If there are multiple borrowers, then the mortgage must be repaid upon the last surviving borrower’s passing. Reverse mortgages cannot be transferred; however, a surviving spouse may remain in the property if they are an eligible non-borrowing spouse.
Devaluation of Property value
Property must remain in a safe and livable condition. If the house is found to be in disrepair, the lender can demand repayment of the reverse mortgage for the borrower not upholding their obligations towards maintaining the loan.
Financial Responsibilities
It is important to note that with a reverse mortgage, borrowers must take on the payments of the homeowner’s association, homeowner’s insurance, and property taxes. These paying off a reverse mortgage Tulsa payments are typically included in the payments for a traditional mortgage, so it often is not something that owners are actively aware of.
Failure to pay for these taxes and homeowner fees can result in the lender forcing the repayment of the debt by the borrower. This has been cited as the reason that nearly 1 in 5 reverse mortgages go into default.
Options for repaying a reverse mortgage
It is important to consider your paying off a reverse mortgage Tulsa goals and needs when deciding to repay a reverse mortgage. Consider if you want to prepare your home for inheritance, sell your home at a later time, or intend to simply live in your home without a reverse mortgage.
Direct Payment – Either over the course of time, or all at once, the reverse mortgage can be paid off as with any other mortgage if possible. Cases or situations like this may occur due to gifts, inheritance, or other sources of funds.
Sale-leaseback – Sale-leaseback is a transaction where you may sell your property to a company, and that company will lease the home back to you. You become a renter of the home so long as the lease agreement is maintained, and rental payments are made and the company becomes responsible for the upkeep and maintenance of the home. This does not include home modifications typically.
Family inheritance – Children or individuals who wish to keep the home may work with the owner in order to pay off the reverse mortgage in full in order to obtain the right to inherit the home or even the transfer of the property.
Selling Property – Selling your home can pay off the debt of the reverse mortgage and you will be able to keep the rest of the proceeds. If the value of the home is worth less than 95% of the reverse mortgage debt, the Federal Housing Administration will cover the rest of the costs.