Sell the house and pay the mortgage balance. Usually, borrowers or their heirs pay off the loan by selling the home and securing the reverse mortgage. The proceeds from the sale of the house are used to pay the mortgage. Borrowers (or their heirs) keep the remaining income after paying off the loan.
Upon the death of the borrower and the eligible non-borrowing spouse, the loan matures and is payable. Your heirs have 30 days after receiving the lender's notice of payment and expiration to buy the house, sell it, or give it to the lender to pay off the debt. However, the deadline may be extended to one year so that your heirs can sell the house or obtain financing to buy the house. Your heirs can consult a HUD-approved housing counseling agency or an attorney for more information.
After the death of the last surviving borrower, the balance of the reverse mortgage loan matures and is payable. Many believe that housing returns to the bank after the last borrower dies, but that is not the case. A reverse mortgage loan only matures and is repaid when the last borrower permanently leaves the home. This could be due to a death or simply a move for any reason.
If you have to move out of the house for any reason, simply sell the house. You pay the amount owed plus interest and fees accrued over the years. What's left after paying off the reverse mortgage is your principal and you keep it. Lenders typically give heirs six months to complete the transaction.
It's important to stay on track, whether you end up selling the residence or keeping it. Again, contact your lender for updates and don't hesitate to ask for help during the process. FHA reverse mortgages allow homeowners who meet specific criteria to receive a monthly income or lump sum payments equal to the net value of their home. The money is reimbursed when the owner dies or sells the house.
However, there are several elements of interest that those applying for an FHA reverse mortgage should be aware of, especially when it comes to what happens at the end of the mortgage. FHA reverse mortgages come to an end in three ways. You can choose to return it; you can sell your house and pay it back; or when you die, the house is sold and the loan is canceled. Unlike conventional loans, you don't owe anything until you die or sell the house.
As with conventional loans, there are commission and interest expenses that must be paid and that usually add up to the amount you receive. When the last owner dies, the executor of the estate must contact the lender. Lenders keep track of the databases that record deaths and will send a notice to the heirs if the records indicate that the last borrower died. If the borrower took a line of credit, that line will be closed.
With a product as potentially lucrative as a reverse mortgage and a vulnerable population of borrowers who may have cognitive deficiencies or are desperately seeking financial salvation, scams abound. While reverse mortgages don't have income or credit rating requirements, they do have rules about who qualifies. Reverse mortgages allow borrowers to enjoy their golden years without having to worry about their home loan. The Department of Housing and Urban Development (HUD) requires all prospective reverse mortgage borrowers to complete a counseling session approved by the HUD.
A reverse mortgage is designed so that you can stay in your home and your heirs can receive some monetary value when the time comes. The program does require a bona fide sale to an unrelated third party, heirs cannot “sell the house to other family members” for less than what is owed on the reverse mortgage, and they expect FHA insurance to cover any deficit to the lender on the amount owed. If you or your surviving co-owner move to a retirement home or long-term care facility, you may have up to one year to pay the reverse mortgage. Variable-rate inverse mortgages are linked to a benchmark index, often the Constantly Maturity Treasury Index (CMT).
Lenders are more satisfied when their loan is repaid and don't have to get involved in a foreclosure process, but the nature of the loan is the last loan you'll ever need, and since most reverse mortgages end in the death of the borrower, the result is usually foreclosure upon termination. When family members don't want to participate or don't have the means to repay the loan or sell the house. Even when the most reputable lenders issue a reverse mortgage, it's still a complicated product. Reverse mortgage borrowers are approved for a maximum loan amount or capital limit, but how you take the money and how quickly you earn interest under the program is entirely up to you.
How invested mortgages come to an end depends on the owner's circumstances, such as a sale, a death, or whether they decide to repay early (for example, if you get money, you could repay part or all of the loan early, but you may have to pay a prepayment fee). There are no restrictions on selling to family members or otherwise, only if the balance of the reverse mortgage exceeds the value of the property and the heirs want the lender to forgive the overvalued portion of the loan and keep the property within the family. But they won't get the title to the property for free because the property is subject to the reverse mortgage. .