However, it may also occur if you default on the loan terms. Loan maturity typically happens if you sell or transfer the title of your home or permanently leave the home. Instead, it is repaid all at once at loan maturity. With that in mind, you may ask yourself: without a monthly mortgage payment, when and how would repayment of a reverse mortgage occur? Reverse Mortgage PayoffĪ reverse mortgage is different from other loan products because repayment is not accomplished through a monthly mortgage payment over time. Though at first this advantage may make it seem as if there is no repayment of the loan at all, the truth is that a reverse mortgage is simply another kind of home equity loan and does eventually get repaid. When you first begin to learn about a reverse mortgage and its associated advantages, your initial impression may be that the loan product is “too good to be true.” After all, a key advantage to this loan, designed for homeowners age 62 and older, is that it does not require the borrower to make monthly mortgage payments. Borrowers are responsible for paying property taxes, homeowner’s insurance, and for home maintenance. In most cases, term payments are significantly higher than tenure payments, because the lender does not know how long you'll be in the house, and must therefore be conservative with your loan amount.The Most Common Way to Repay a Reverse Mortgage Matt and Cindy have two monthly payment options - "tenure" payments for life or "term" payments for a specific time period - in their case, the ten years in which they expect to occupy the home. They're 73 and 70 and expect to live in their home 10 more years. Their Social Security income is only about $3,000 a month, and some extra income would really improve their lifestyle. Their home, which they own free and clear, is worth $400,000. Matt and Cindy are house-rich and cash-poor. Now let's look at a situation where the homeowners are house-rich and cash-poor.ĮXAMPLE WHERE THE REVERSE MORTGAGE DECISION IS BASED ON REMAINING TIME IN HOME ** If unused, HECM credit lines grow at the loan's variable interest rate. *Elimore's property may be worth $300,000, but it's subject to a $80,000 loan. Unused, the line of credit will grow over time.
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