What Happens When A Reverse Mortgage Comes Due?
Those that are considering a reverse mortgage should pay close attention to the end result of what they are doing. To secure this type of mortgage, homeowners must be at least 62 years of age or older and they must have equity in their home. The funds from a reverse mortgage can be used in virtually any manner that the homeowner would like them to be used. This can be such things as home improvements or even to pay for assisted living or long term care. But, many people do not understand what will happen when their reverse mortgage is due to be paid back.
This is unlike a standard mortgage because you will not make payments on the home each month. You will not have to pay the loan back at all unless you decide to do so. In any case, the reverse mortgage will be paid back in a lump sum once the homeowner dies or he moves out of the home permanently. At this point, the mortgage is due to be paid. This can be done in one of two ways.
The first way is that the heirs of the estate of the homeowner can pay for the loan. If they determine that they would like to keep the home in the family, for example, they have the ability to pay off the mortgage within a year of the death of the last homeowner on the loan. This amount will incur interest during the time that the loan is not paid off.
Secondly, if the homeowners or their heirs decide not to pay off the mortgage, the home will be sold to pay of the mortgaged amount of it. Generally, once the home is sold, the mortgage is paid off and all is clear. If the home does not sell for enough money to cover the value of the mortgage, even if you have made every attempted possible to do so, FHA will step in and make up the difference. This is because the reverse mortgage is backed by the federal government in that it is an FHA loan that you are taking out.
What is important to note here, though, are the feelings of those that are being left out. For example, if the homeowner dies and his home must be sold to pay off the reverse mortgage, the heirs may not have the funds to pay off the amount owed and will therefore not inherit the home itself. The decision to use a reverse mortgage is something that many people should make with their heirs.
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