The easiest way to stop a reverse mortgage is to exercise your right to rescission. This right is a form of consumer protection that enables you to walk away from a reverse mortgage without penalty, for any reason, within three days of signing the loan agreement.
What happens if I have a reverse mortgage and I have to move out of my home, such as moving into a nursing home or to live with family? Reverse mortgage loans typically must be repaid either when you move out of the home or when you die.
Just like a traditional mortgage, with a HECM you are borrowing money and using your home as security for the loan. You must continue to pay for property taxes, homeowner's insurance, and make repairs needed to maintain your home or the lender can foreclose on 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.
After the passing of the last surviving borrower, the reverse mortgage loan balance becomes due and payable. Your heirs can decide whether to repay the loan balance, keep the home, sell the house, and keep the equity, or walk away and let the lender dispose of the property.
The 60% Utilization Rule
Home equity conversion mortgage HECM borrowers may only take the greater of 60% of their total available equity or the total amount of their mandatory obligations plus 10% in the first payout.
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.
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.
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.
While you don't have to make regular payments on the loan, the home must be your principal residence, and the entire reverse mortgage becomes due if you are absent from the home for more than six months (or more than 12 months for a medical reason). These are the residency requirements for maintaining the loan.
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.
As the field is not level, borrowers who walk away need to be willing to accept the consequences, which can include damaged credit, harassment by collection agencies, and difficulty obtaining credit for years.
The lender will follow the same procedures they would follow for any other loan. The actual foreclosure process takes about 5 – 6 months from the time the lender files the first notice of default unless they are required to go through a court foreclosure which is rare.
You can get out of a reverse mortgage by using the right of rescission, selling the home and paying back the loan, or refinancing for more favorable terms. As a last resort, you can walk away by surrendering the deed.
A reverse mortgage agreement does not require a homeowner to give up the title to borrow money. If you currently own your home and set up a reverse mortgage, you or an heir will only give up ownership of the property if the terms of the agreement are breached.
Myth #1: The Lender or Government Will Take My Home
With a reverse mortgage, you or your estate continue to retain control and remain on the title of the home. As with any loan, the lender simply puts a lien on the property to ensure the loan gets repaid.
Can you be kicked out of your house with a reverse mortgage? Yes, it is possible that you can get kicked out of your house with a reverse mortgage taken out against it. This primarily happens when you violate one of your lender's reverse mortgage rules.
A reverse mortgage shall constitute a lien against the subject property to the extent of all advances made pursuant to the reverse mortgage and all interest accrued on these advances, and that lien shall have priority over any lien filed or recorded after recordation of a reverse mortgage loan.
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.
Reverse mortgage loans typically must be repaid either when you move out of the home or when you die. However, the loan may need to be paid back sooner if the home is no longer your principal residence, you fail to pay your property taxes or homeowners insurance, or do not keep the home in good repair.
If you wish to keep the home, but the amount owed on the reverse mortgage is more significant than the current value, you have the right to pay off the loan at an amount of the existing loan balance or 95% of the current market value, whichever is less.