What is a Reverse Mortgage?
In a traditional mortgage, a homeowner borrows a sum of money from a lender to purchase or refinance a home, and makes monthly payments to the lender until the debt is paid. Once the mortgage is fully paid, the borrower owns the home outright.
With a reverse mortgage, an older homeowner borrows a sum of money from a lender against their equity in a home they already own. As needs change with age, older homeowners may borrow against their home’s equity to pay for things such as long term or at home health care services. Instead of the homeowner paying the lender each month, the lender makes payments to the homeowner through either a monthly payment, line of credit, or lump sum. The homeowner keeps the title to their home, which acts as collateral, and is charged interest on the loan proceeds they receive, as well as various fees and charges. In most cases, the homeowner is then required to pay property taxes and insurance.
Reverse mortgages are designed to give older homeowners an additional revenue stream, and are available to people who:
- Are at least 62 years old
- Occupy the home as their primary residence (It cannot be a vacation home or rental home)
- Hold title to the home
- Own the home outright, or have a very low mortgage balance
Many reverse mortgages are federally insured through the Federal Housing Administration’s Home Equity Conversion Mortgage program. This insurance guaranteed lenders that they will be paid back in full once the home is sold.
When is a Reverse Mortgage Due and Payable?
A reverse mortgage can become due and payable when:
- The borrower, or borrowers, have died.
- The home is sold, or the title is transferred
- The borrower stops using the home as their primary residence for more than one year.
- The borrower breaks the terms of the mortgage, for example by not paying taxes or homeowner’s insurance, or not keeping the home in good condition.
Once the reverse mortgage is due and payable, the homeowner, or their heirs, must pay the lender the amount due on the loan, plus any interest and fees, or face foreclosure.
How Can I Avoid Reverse Mortgage Foreclosure?
If you are facing a reverse mortgage foreclosure, there are options available to defend against the foreclosure and keep the home. If you are a homeowner, or the heir to the property being foreclosed, you may be able to get a loan modification to help you pay back the lender. It is also possible for family members to pay back the loan or sell the property.
Contact Ira J. Metrick today to discuss your options for stopping the reverse mortgage foreclosure and keeping your home. We can also conduct an analysis to determine if you are eligible for a loan modification, and give you an estimate of the payment terms.