Common Loan Terms for a Reverse Mortgage
[Continued from: Reverse Mortgages]
With a reverse mortgage, you remain the owner of the home, and are still responsible for paying property taxes and homeowners insurance and making necessary repairs on the home. If you fail to fulfill any of these obligations, the lender can ask for repayment. It is usually possible to finance the fees associated with a reverse mortgage out of your payments.
The amount of your payments depends on how old you are and how much your home is worth. The older you are, and the more your house is worth, the higher your payments will be.
Most homeowners get the largest cash advances from the federally insured Home Equity Conversion Mortgage (HECM). HECM loans typically provide larger payments than other reverse mortgages.
During the lifetime of your reverse mortgage, you cannot rent out part of your home, add a new owner to your title, or take out any new debt against your home.
It is possible to default on a reverse mortgage. Declaring bankruptcy, abandoning your home, or committing fraud are all conditions for default.
The loan can also be terminated if the government condemns your property or requires it for public access, such as building a new road.
When Do You Pay Back A Reverse Mortgage?
The reverse mortgage becomes due when the last surviving owner dies, sells the home, or permanently moves out of the home. When the loan is over, you or your heirs must repay the loan plus interest, generally by selling the house.If your debt is less than the selling price of the house, your heirs keep the difference.
It is not possible for you to owe more than your home is worth, and your lender cannot seek payment from your estate or heirs.
Reverse Mortgage Warnings
Taking out a reverse mortgage may impact your taxes or your eligibility for federal assistance. The IRS does not consider loan advances to be income, but if the money received through the advance stays in your account past the end of the month, it is counted as a liquid asset for the purposes of Medicaid and SSI.If your total liquid assets are greater than the allowable limits for these programs, you may lose your eligibility for these and other government programs.