Reverse Mortgage

To pay off a Reverse mortgage, you or your heirs typically have a few options. The loan can be repaid by selling the home, using the proceeds to settle the loan balance. Alternatively, you or your heirs can use other funds, such as savings or other assets, to repay the loan and retain ownership of the home.

If the loan balance exceeds the home's value, the lender will usually absorb the loss, as most reverse mortgages are non-recourse. The heirs can also choose to deed the property to the lender, satisfying the loan obligation. Repayment options should be carefully considered to determine the best course of action.

Generally, a Reverse mortgage won't affect your Social Security or Medicare benefits, as these are not considered income and are not subject to the same rules as other types of income.

However, if you receive need-based benefits, such as Supplemental Security Income (SSI) or Medicaid, the funds from a Reverse mortgage could potentially impact your eligibility if they're not spent within the same calendar month they're received. It's essential to consult with a financial advisor or benefits counselor to understand how a Reverse mortgage might affect your specific situation. They can help you navigate the rules and make an informed decision.

A Reverse mortgage can be foreclosed if the borrower fails to meet certain obligations, such as paying property taxes or insurance, or maintaining the property. Although Reverse mortgages don't require monthly mortgage payments, borrowers must still keep up with these other responsibilities.

If they fail to do so, the lender can call the loan due and potentially foreclose on the property. However, as long as the borrower lives in the home and meets the loan terms, they cannot be forced to leave or have the loan foreclosed. Borrowers should carefully review their loan terms to understand their obligations.

You retain ownership of your home with the lender placing a lien on the property. You're responsible for property taxes, insurance, and maintenance. The loan becomes due when you pass away, sell the home, or move out permanently.

Your heirs can then choose to repay the loan and keep the home, sell the home to repay the loan, or deed the property to the lender. This arrangement allows you to remain in your home while accessing its equity.

The main pros of a Reverse mortgage include accessing a portion of your home's equity without having to make monthly mortgage payments, allowing you to stay in your home while supplementing your retirement income. This can provide financial flexibility and help cover expenses such as healthcare costs or home repairs.

You can receive the funds as a lump sum, monthly payments, or a line of credit, giving you control over how you use the money. Additionally, Reverse mortgages are non-recourse loans, meaning you or your heirs won't owe more than the home's value when the loan is repaid.

The main cons of a Reverse mortgage include high upfront costs, such as origination fees and closing costs, which can be substantial. Additionally, the loan balance can grow over time, reducing the amount of equity available to heirs.

There's also the risk that the loan balance could exceed the home's value, although most Reverse mortgages are non-recourse. Furthermore, borrowers are still responsible for property taxes and insurance, and failure to pay these can lead to foreclosure. These factors should be carefully considered before deciding on a Reverse mortgage.

The VA does not offer Reverse mortgages.