Moving Out of Your Home with a Reverse Mortgage: What Every Borrower Should Know
When homeowners and homebuyers age 62 and older take out a reverse mortgage loan — a home-secured loan that allows borrowers to leverage their built-up equity — most intend to stay in their home for the long haul. But life happens and circumstances may change, causing the loan holder to move out earlier than planned. What does that mean for you, your spouse, and your heirs?
Assuming the home is not sold and loan obligations are otherwise met, no longer living in the home as your primary residence for a year or more can trigger a reverse mortgage loan to become due and payable. So, if you relocate to live with family or move to a long-term care facility, you’ll likely receive a notice. But what if you spend three months in a rehabilitation facility recovering from illness or surgery? Here’s how some different scenarios may play out if a move is imminent.
#1 You and spouse are co-borrowers.
If you and your spouse are both co-signers on the loan, and one of you must move into a nursing home for full-time care, the other borrower may continue to own and live in the home — and enjoy all the benefits of the reverse mortgage. For co-borrowers on a reverse mortgage, the mortgage is not due and payable until both parties move out or pass away. As with any home-secured loan, the borrower must continue to meet the loan obligations and keep current with property taxes, insurance, and maintenance.
#2 You’re the sole borrower.
If you and your spouse are not co-borrowers, and, for example, the borrower moves out for longer than 12 months, the loan will be become due and payable. This means your spouse, partner or any family members living in the home must vacate. The most common solution is to sell the home in order to pay back the balance of the loan. It’s important to note that reverse mortgage loans insured by the FHA* are nonrecourse. That means if the loan obligation is greater than your home’s value at the time of sale, you or your heirs are only required to pay 95% of its current appraised value.
#3 You’re only moving out temporarily.
Remember, unless you fail to utilize the home as a primary residence for a period of 12 consecutive months or longer (and otherwise meet your loan obligations), you are typically not in danger of violating the terms of your loan. However, you should always consult your loan documents.
Before signing a reverse mortgage contract, borrowers should thoroughly familiarize themselves with all the possible outcomes. By knowing what may come, you can devise a contingency plan, so there are no surprises.
Get a move on — with a reverse mortgage loan
If you’re age 62 or older and planning to stay in your home for the foreseeable future, a reverse mortgage loan can be a smart way to increase your funds and provide you with financial security during retirement. This type of loan works by giving you access to the equity you’ve already built up in your home in the form of a lump-sum payment, a monthly payment or a line of credit that’s there when you need it.†
To learn more, reach out to Reverse Mortgage Funding, LLC (RMF) at (888) 277-1567. We’ll schedule a convenient, in-person appointment with a loan specialist in your area.
This content is sponsored by RMF, one of the nation’s leading reverse mortgage lenders. We are dedicated to helping older Americans retire more freely, in the comfort of their own homes. As a result of our commitment to providing an extraordinary and positive customer experience, we have earned a 98% customer satisfaction rating; a 4.7-star / Excellent score on Trustpilot; 4.8 out of 5 stars on LendingTree; and an A+ rating with the Better Business Bureau. Call 888-277-1567 to speak with a licensed reverse mortgage specialist to learn about our retirement financing products and solutions.
SEE WHAT FUNDS YOU MAY HAVE AVAILABLE
If you have equity in your home and believe you meet the eligibility requirements, a HECM may be the option that could help you retire smart.
*This material has not been reviewed, approved or issued by HUD, FHA or any government agency. The company is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency.
†Borrowers who elect a fixed rate loan will receive a single disbursement lump sum payment. Other payment options are available only for adjustable rate mortgages.