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When to pay back reverse mortgages

Posted on: 26th Mar, 2004 03:54 am
Reverse mortgages are payable only when the last surviving borrower dies, sells the property, permanently moves out or when he reaches the end of the loan period. A permanent move is implied when you, the co-borrower, or a qualifying relative has occupied the home for at least 1 year. If you die, the lender will not be able to take the title if your heirs can repay the loan.

When the loan may be in default


The loan will be in default if:
  • You or the co-borrower have filed bankruptcy.

  • The borrower donates or abandons the home

  • You haven't paid property taxes

  • You haven't maintained your home or paid for repairs

  • Your home is no longer insured
Moreover, if the loan has an acceleration clause , the lender may require you to pay down the mortgage if:
  • A co-owner has been added to the property title

  • You have rented out the property to a non-relative

  • You have taken a new loan on your home

  • You have changed the property's zoning classification
Make sure you check the loan documents so you know what situations will cause your loan to default and your repayments to accelerate.
Related Articles

Hi

I don't think the lender has any right to force on the executor of your mom's account. To recover the reverse mortgage money, the lender will simply sell off the property and even if there arises any deficiency, the heirs cannot be held responsible for that. I don't understand on what ground they are forcing the executor and what's the logic behind it.
Posted on: 09th May, 2009 04:39 am
A reverse mortgage is a loan product that allows homeowners 62 years of age and older to use their equity to generate tax-free income, without having to sell the home or take on a new mortgage payment.
Posted on: 09th May, 2009 07:19 am
My parents just told us that they have a reverse mortgage, after doing much reading the one question I have I can't find an answer for. What happens whent the time comes to sell the home and there isn't enough money from the sale of the home to repay the loan? Who is responsible for the difference?
Posted on: 24th Jun, 2009 08:55 am
>>What happens when the time comes to sell the home and there isn't enough money from the sale of the home to repay the loan? Who is responsible for the difference?

If it's a HECM (Home Equity Conversion Mortgage), HUD will pick up the difference - that's what the insurance is for. Neither the homeowners or heirs are obligated.

If it's a Proprietary Reverse Mortgage (commonly referred to as Jumbo Reverse Mortgage), the Lender is resonsbile for the difference. That's why Jumbo's have a higher interest rate then HECM's.

That's referred to as non-recourse. All Reverse Mortgages are non-recourse loans.
Posted on: 03rd Jul, 2009 01:02 pm
>>he is telling us that the mortgage company is forcing him to leave on utilities until they are finished with their inspections. He says we are looking at another 2 - 3 months at least. Does this sound right?

No, it doesn't sound right. Call the Lender yourself and ask. Ask to speak to a customer service representative. You'll find the phone number on the monthly statement. Or call the Lender's main number and ask for the Customer Service department.
Posted on: 03rd Jul, 2009 01:11 pm
>>How can you make monthly payments on your reverse mortgage to pay down the debt?


Yes, and it can be anytime, not just monthly. The only guideline is the payment must be at least $100.00.
Posted on: 03rd Jul, 2009 01:16 pm
>>Both my parents just died. they had a reverse mortgage for 5 yrs. There are 6 adult heirs. Must the money be repaid in a lump sum, or can we pay back monthly?


It works exactly like a traditional mortgage in this area - all of it has to be repaid as a lump sum.
Posted on: 03rd Jul, 2009 01:19 pm
>>is it possible for her to pay back the money she received and get out of the second mortgage.

yes, it works exactly like a traditional mortgage in this sense. however, if she were my client i'd advise her to pay it all back except 1 dollar. that'll keep the reverse mortgage open forever, and she'll only have to pay pennies to keep it open. that way, if she were to need a reverse mortgage in the future, she wouldn't have to pay all those high fees again.
Posted on: 03rd Jul, 2009 01:22 pm
>>She should look if there is a pre=payment penalty attached with the mortgage.


Good suggestion! Fortunately, Reverse Mortgages don't have pre-payment penalties.
Posted on: 03rd Jul, 2009 01:27 pm
>>the way it was worded to me: the three of us have the title but the reverse mortgage is in her name.

only people 62 or older are allowed to be on title - no exceptions. with my loans, the homeowners who are currently on title and younger then 62 would be at the final signing table and sign a quit claim deed immediately before the loan documents are signed.

also, everyone currently on title must attend hud's mandatory reverse mortgage couseling session, and must sign the counseling certificate.
Posted on: 03rd Jul, 2009 01:38 pm
>>if someone gets a reverse mortgage based on the current value of their home and has it for 10 years, is it possible to pay it off and get a new reverse mortgage based on the increased value of your home?

yes, a reverse mortgage works exactly like a traditional mortgage in this sense. if you have a fha-insured reverse mortgage program, it's called a hecm to hecm refinance, and the fees are lower because the insurance is prorated.
Posted on: 03rd Jul, 2009 01:41 pm
>>What you can do is ask your grandmother to talk to the lender if he will allow her children to take over the responsibility of paying the mortgage.


The Lenders never allow this because they'd lose everytime. It's a negative amoritzation, non-recourse loan without a monthly payment - in addition to no structure existing for the heirs to make a monthly payment, the lender would loose because of the non-recourse nature of the program.
Posted on: 03rd Jul, 2009 01:56 pm
>>she is over 65 and my question is what would happen to our house when she dies if we go with a reverse mortgage?

You'll have to pay off the Reverse Mortgage to keep the house. If you're going to do this route, the proper way to do it is by the Title Holder leaving you Title via a Living Trust. That'll avoid Probate and make the Title transition easier. Also have her get a life insurance policy that leaves you with enough cash to pay back the Reverse Mortgage Lender when she passes. That'll make that process easier on you. Another way is via a Life Estate. The property becomes yours after she passes, but you've still got to pay the Reverse Mortgage lender back.
Posted on: 03rd Jul, 2009 02:02 pm
my mom had a reverse morgage being i'm diabled do i have to pay back the reverse morgage upon her death
Posted on: 21st Jul, 2009 03:26 pm
Can a person start paying off his reverse mortgage, and how can they do it.
Posted on: 27th Jul, 2009 04:11 pm
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