Can you owe money on a reverse mortgage?

This means that you can never owe more than the value of your home the moment you or your heirs sell it to pay your reverse mortgage. Inverted home loans generally need to be repaid when you move out of the house or when you die. However, the loan may need to be repaid sooner if the home is no longer your primary residence, if you don't pay property taxes or property insurance, or if you don't keep the house in good condition. Anyone can pay a reverse mortgage, including the borrower, spouse, heirs, or other family members.

This is more common in situations where the last surviving borrower or spouse who is not eligible for the loan dies, and the heirs decide to cancel the loan. Because a reverse mortgage is a loan with “negative amortization”, your balance increases over the life of the loan. When it comes to pricing, invested mortgage lenders are now more willing than ever to help pay the costs of inverted mortgages whenever they can. If you buy those types of financial products, you could lose the money you get from your reverse mortgage.

While reverse mortgages don't have income or credit rating requirements, they do have rules about who qualifies. Unscrupulous home improvement sellers and contractors have turned to older people to help them obtain reverse mortgages to pay for home improvements, in other words, so they can earn money. As with any mortgage, there are conditions to keep your reverse mortgage current and, if you don't meet them, you could lose your home. However, lenders must perform a financial evaluation when deciding whether to approve and close your loan.

Only the lump sum reverse mortgage (one-time payment), which gives you all your income at once the loan closes, has a fixed interest rate. The counselor should also be able to help you compare the costs of different types of reverse mortgages and explain how different payment options, fees, and other costs affect the total cost of the loan over time. With a reverse mortgage, instead of the landlord making payments to the lender, the lender makes the payments to the homeowner. Repayment of the loan is mandatory when the last surviving borrower leaves the home permanently or does not maintain property taxes or property insurance.

Keep reading to learn more about how reverse mortgages work, how to qualify for a reverse mortgage, how to get the best deal for you, and how to report any fraud you may see. The ability to leverage the value of their home by converting their equity into cash can be a powerful tool for someone trying to find a way to expand their financial options for a wide variety of reasons.

Harry Lammel
Harry Lammel

Unapologetic lover of life. Award-winning family man. Typical husband and father. Music junkie. Food buff.