When Does a Reverse Mortgage Have to Be Repaid?

by Francine Huff
May 7th, 2009

Demand for reverse mortgages is strong as many seniors are finding themselves looking for new sources of income to help manage their expenses. One of the biggest selling points for obtaining a reverse mortgage is that it doesn’t have to be repaid until you’re no longer living in your home. But what happens if you get such a mortgage and must leave your home sooner than you expected?

A reverse mortgage is like a home-equity loan that doesn’t have to be repaid until the borrower leaves their home. The homeowner can receive a lump sum payout or get regular payments over a period of time. People who aren’t sure they’ll stay in their home for the long term may want to elect to receive regular payments to preserve some of the equity in their home longer.

Some of the reasons a homeowner may decide to tap into their equity and get a reverse mortgage are to pay for long-term care insurance, make home improvements, or because they have seen their retirement account significantly decline due to the drops in the stock market. But even some people who go through with a reverse mortgage loan may find that at some point they need to repay it sooner than they thought. Among the reasons a reverse mortgage loan must be repaid are:

—If you die your heirs will likely have to sell your home to repay the debt
—You move to a new home that is your primary residence
—You have not lived in your home for 12 consecutive months, including an extended stay in a nursing home
—You fail to pay your property taxes or insurance
—You don’t keep up with necessary repairs on your house

A reverse mortgage lender can help you decide whether it makes sense to get this type of loan whether you plan to be in your home until you die or for a shorter period of time. The Federal Housing Administration also has more information to help you learn about reverse mortgages.

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