When Does a Reverse Mortgage Come Due?

reverse mortgageA reverse mortgage allows homeowners to convert part of their home equity into cash without having to sell their home or make regular monthly payments. Instead, the loan is typically repaid when the borrower moves out of the home permanently, sells the home, or passes away. However, there are specific circumstances under which the loan may become due earlier than expected.

Most reverse mortgages fall under the category of Home Equity Conversion Mortgages (HECMs), which are insured by the Federal Housing Administration (FHA). With HECMs, repayment is typically required when the last surviving borrower no longer lives in the home as their primary residence. This could occur if the borrower moves to a different location, such as to be closer to family or into an assisted living facility.

When Do You Have to Repay Your Reverse Mortgage?

If You Have a Spouse Who Didn’t Sign

If a borrower has a spouse who didn’t sign for the reverse mortgage but is considered an “eligible non-borrowing spouse” under the rules established by the U.S. Department of Housing and Urban Development (HUD), they may still be allowed to remain in the home after the borrower’s passing. In such cases, the loan may become due upon the departure or passing of the borrower, depending on the specific terms of the loan agreement.

reverse mortgage questionsWhat Happens If You Move Out or Die?

When the borrower moves out of the home permanently or passes away, the Myrtle Beach reverse mortgage loan generally becomes due. If the borrower’s spouse or another individual residing in the home is also listed as a borrower on the loan, they may have the option to continue living in the home and receiving disbursements from the loan as long as they fulfill the ongoing obligations, such as maintaining property taxes and homeowners insurance.

However, if the spouse or other resident is not listed as a borrower on the loan, they may be required to vacate the property following the borrower’s departure or death, depending on the terms of the loan agreement and applicable laws.

What if You Sell Your Home?

In the event that the borrower decides to sell the home, the loan must be paid back, along with any accrued fees and interest. If the sale proceeds are sufficient to cover the loan balance, the borrower retains the remaining funds. However, if the sale proceeds are insufficient to satisfy the outstanding loan balance, the lender may collect the proceeds from the sale, and any shortfall may be covered by mortgage insurance.

If the loan is in default and the lender issues a notice stating that the loan is due and payable, the borrower may have the option to sell the home for 95% of its appraised value, with the proceeds applied towards the outstanding loan balance.

What Happens If You Pass Away?

Upon the borrower’s death, the reverse mortgage loan typically becomes due. However, various factors, such as the presence of a co-borrower on the loan, the timing of the loan origination, and the marital status of the borrower, can influence the repayment requirements. Notably, if the reverse mortgage was originated after a certain date specified by HUD, the due and payable status of the loan may be deferred.

Call David Stacy Reverse Mortgage Specialist today to learn more about reverse mortgage loans and how they may impact your financial situation.

David Stacy Reverse Mortgage Specialist
Myrtle Beach, SC 29577
(843) 491-1436

We serve all of Horry County including: North Myrtle Beach, Carolina Forest, Socastee, Forestbrook, Conway, Surfside Beach, Little River, Myrtle Beach, Forestbrook