Reverse Mortgage an Option?
Some tips for reverse mortgage loans
- Repayment of a home equity loan balance may be deferred until the last borrower or non-borrowing spouse has died, moved, or sold the home. ( we have seen banks try to force non borrower spouse into moving or handing over title)
- Prior to the home becoming vacant through death moving or selling the borrower can make repayments voluntarily at any point to help reduce future interest due and to allow for a larger line of credit to grow for subsequent use
- Typically no penalty is due for early repayment.
- When the final repayment is due, the title for the home will remain with the heirs. Make sure there is a will in place !!!
- Should heirs wish to keep the home after vacancy, the loan balance can be repaid with other funds.
- Should heirs decide to sell the home, the heirs keep any amount the home sells for in excess of the outstanding loan balance. Should the loan balance exceed what the home can reasonably be sold for, heirs can usually hand over the keys to the home to the lender through a deed in lieu of foreclosure.
- A deed in lieu of foreclosure is sufficient to extinguish the debt on the reverse mortgage, and the mortgage insurance from the government will compensate the lender for the difference.
- Typically the heirs will have up to 360 days w to sell the home or refinance when the loan comes due. It is VERY IMPORTANT to know that the bank will usually try to escalate the repayment, foreclosure or deed in lieu . Work with a specialist like us to make sure contact is kept with the lender. It is important to provide updates to the lender to use the full 360 days.
- With the non-recourse aspect of reverse mortgages, the borrowers or their estate typically do not have to pay back more than the value of the home, even if the loan balance is higher. In these circumstances, the borrower (or estate) can grant a “deed in lieu” and walk away from the obligation of selling the home. Any difference between the loan balance and homeowner is covered by the mortgage insurance premiums which have accumulated over time as part of the loan balance. Alternatively, if the borrower (or estate) can sell the home for more than the loan balance, then they keep the difference.