Under a reverse mortgage plan, the title to your home belongs to you. Similar to a traditional home mortgage agreement, reverse mortgages allow you to borrow money and place your home as security for the loan.
A reverse mortgage loan becomes due and payable after your death and after the death of any coborrowers or of an eligible nonborrowing spouse. Once your heirs receive a due and payable notice from the lender, they have 30 days to buy, sell, or turn the home over to the lender to satisfy the debt.
With a reverse mortgage, the title of the home remains in the borrower's name. Proceeds from a reverse mortgage can be used as a down payment on a second home in some cases , or help supplement retirement income to cover monthly expenses.
The lender cannot foreclose on an HECM and the borrower cannot lose the home.
If your reverse mortgage loan is in default and you've received a notice that the loan is “due and payable,” you may sell your home for 95 percent of its appraised value.
Selling a house with a reverse mortgage isn't as simple as selling a home with a traditional mortgage — but it can be done with a little planning. With a reverse mortgage, you borrow against the equity in your property to receive cash upfront or a stream of monthly payments.
You're still responsible for paying property taxes and insurance, and if you default on your property taxes, you could lose your home to tax foreclosure. A reverse mortgage lender can foreclose on the home if you're not living in it for more than 12 consecutive months due to health care issues.
A reverse mortgage usually must be repaid when the borrower moves out for 12 consecutive months or more, such as into a nursing home or other care facility. If the borrower is married, their spouse can remain in the home under certain conditions.
If the end of your term is up before you pass away, then you have outlived your reverse mortgage proceeds. With a term payment plan, you reach your loan's principal limit—the maximum you can borrow—at the end of the term. After that, you won't be able to receive additional proceeds from your reverse mortgage.
An adult child who inherits a home that has a reverse mortgage would need to pay off the balance to keep the home, though they're not legally obligated to do so.
Technically speaking a Reverse Mortgage is guaranteed by HUD/FHA until age 150 of the youngest Borrower. But because that number is still so far above current life expectancy the real answer is that a Reverse Mortgage will last as long as you need it to.
Walk Away. You can walk away from a reverse mortgage as a last resort. Handing over the deed to the lender will release you from your loan, but you will also lose your house.
The title or the “Deed” on a reverse mortgage is just like any other property with a loan or lien against the property. The borrower holds the title, so the Deed or title is in the borrower's name.
The lender recovers the money advanced to you, plus interest, when the home is sold. If the home is sold for more than is required to satisfy the obligation, the remaining equity goes to you or your heirs.
The problem, say advocates, is that many senior homeowners don't understand the fine print in a reverse mortgage. Some wrongly assume the lender will pay the taxes and insurance. But fall behind on those payments or fail to maintain the home, and the lender can foreclose.
A reverse mortgage may be a good idea if:
You and your spouse/partner are both 62 or older. You are in a strong financial position. You are able to physically maintain your home.
Alternatives to a reverse mortgage include home equity loan, home equity lines of credit, and cash-out refinances. These financial products can help you tap the equity in your home to use as cash for other purposes.
Suze Orman's opinion on reverse mortgages
She has spoken out against these loans on numerous occasions, warning that they can be a risky financial decision for many older Americans. One of Suze's main concerns with reverse mortgages is that they can be incredibly expensive.
How Much Money Do You Get From a Reverse Mortgage? The amount of money you can borrow depends on how much home equity you have available. You typically cannot use more than 80% of your home's equity based on its appraised value. In 2023, the maximum amount anyone can be paid from a HECM reverse mortgage is $1,089,300.
No. When you take out a reverse mortgage loan, the title to your home remains with you. This webpage has information about HECMs, which are the most common type of reverse mortgage.
Reverse mortgage loans typically must be repaid, usually by selling the home, when the last borrower dies. However, non-borrowing spouses may be able to stay in the home if they meet certain criteria. Most reverse mortgages today are Home Equity Conversion Mortgages (HECMs).
Typically, a reverse mortgage doesn't need to be paid back until you move out of the home or pass away. At that point, you or your heirs will pay back the amount borrowed as well as interest and fees accumulated over time.