Possible To lose your home with reverse mortgage
A reverse mortgage refers to a loan that is taken out by individuals over the age of 60. Essentially a reverse mortgage allows the borrower to access the equity in their homes. This equity is then converted into payments that the lender pays out to you.
The money received as part of the payment is usually tax-free. If you decide to take out a reverse loan, the title to your home stays in your name.
If you are considering taking out a reverse mortgage you may be wondering whether there is a risk of you losing your home. We have provided you with all of the answers in our guide below.
Many people believe that their home becomes the possession of a bank if they take out a reverse mortgage, however, this isn’t the case.
Because you retain ownership of your lose home with reverse mortgage, if you meet the terms presented to you by the lender, there are very few ways that you can lose this ownership.
The following are situations that may cause you to lose home with reverse mortgage.
To avoid repayments, ensure your home is your primary residence (not away for more than 6 months) and the property in question is where you live most of the time.
Moreover, if the current owner of the property dies and the remaining person is not listed as a borrower, there is a risk that the lender may request repayments.
Failure to keep up with your homeowner’s insurance provides another reason as to why you may lose your home.
Stay current on homeowner’s insurance, property taxes, homeowners association fees, and other house expenses. This is because the lenders do not want to take on a lot of risks.
Part OF Application Process
When applying for a reverse mortgage, the borrower’s ability to cover additional costs will be evaluated, so it’s crucial to keep all payments up-to-date.
If you do not keep your home in good condition, you may lose it. As your home is considered collateral, it may need to be sold for repayments in some cases.
If you do not maintain the state of the property, it may decrease in value. Requirements must be met, otherwise disrepair, such as leaky roofs, could result in being forced out of the home.
As you can see, there are a few requirements that you need to meet as the homeowner. If you fail to adhere to these regulations and end up defaulting on your loan, a foreclosure may occur.
A foreclosure is a legal process that involves the lender and borrower. If there is a balance on the loan that is outstanding because the borrower has stopped making the payments, the lender will force a sale to cover the balance.
What Happens If The Borrower Defaults On Their Reverse Mortgage?
In the past, there have been instances where those over the age of 60 who are eligible for the loan have lost their homes, however, this doesn’t always happen straight away.
If the homeowner fails to make payments, future loan payments are likely to be suspended.
The lender will usually provide the borrower with a timeline that schedules all of their upcoming payments. If the borrower defaults on payments, the lender may request loan repayment.
Although this may seem like a challenge for the borrower, they are options available to them. Some borrowers may choose to sign their property over to the lender so that it is no longer in their ownership.
Depending on the situation, some borrowers may be able to afford to fully repay the remaining balance of their loan.
After doing so, their home then belongs to them and they don’t have to worry about any pending payments. If the borrower is not able to raise the funds needed to cover the payments, they may choose to let the lender begin the foreclosure process.
What Happens If The Homeowner And Reverse Mortgage Borrower Dies?
Now you may be wondering what happens if the borrower/homeowner passes away. Consult your lender as rules and regulations may vary depending on the lender.
Options for paying remaining balance on the estate will usually be discussed with you. Normally, they will give you around 30 days to decide what you want to do.
To pay off the remaining balance, you’ll typically have 6 months to either pay off the mortgage or sell the property.
How Long Can You Live In Your Home When You Have A Reverse Mortgage?
This can differ depending on the program and provider that you go to for your mortgage. Repayments usually only begin after 12 consecutive months of residency in your home.
Losing your home can occur with a reverse mortgage if requirements such as primary residency, insurance/tax payments, and acceptable property condition are not satisfied.