Since a reverse mortgage is a loan, it eventually must be repaid. The good news is that as long as you fulfill your obligations as the homeowner, repayment doesn’t have to occur until after you are no longer in the home. At that point you (or your heirs) must repay the reverse mortgage, including accrued interest and fees. However, you, as the borrower will never have to pay any amount that’s more than what your home is worth.
When repayment begins
While you have your reverse mortgage, you don’t have to make any monthly mortgage payments. The loan repayment process does not have to begin until one of the following events occurs:
- All borrowers permanently move out of the home.
- The last surviving borrower passes away, sells the home, or doesn’t live in the home for 12 consecutive months.
- The borrowers don’t pay property taxes or insurance.
- The borrowers let the property deteriorate beyond what is considered reasonable wear and tear, and do not correct the problems.
How the loan is repaid
You can decide how the loan balance—which includes any fees and accrued interest—is repaid. Many homeowners (or their heirs) choose to sell the house. Repaying the reverse mortgage through a conventional mortgage is another option.
What happens if you sell your home
Remember: the lender does not own the home, you do. So you can choose to sell your home at any time, at which time the reverse mortgage is repaid from the proceeds of the sale. Because a reverse mortgage is a “non-recourse” loan, you’ll never owe the lender more than the home is worth at the time of its sale. The fees on your reverse mortgage include a payment for insurance that ensures you’ll never owe more than your home’s fair market value. If what you receive for the sale of the home exceeds what you owe for the reverse mortgage, you keep the difference.
When there are co-borrowers
Whatever names are listed on your home’s deed (for example, you and a spouse) will also be listed as co-borrowers on your reverse mortgage. The death of a co-borrower, however, does not force repayment of the loan. The surviving borrower can continue to own and live in the home—and enjoy all of the benefits of the reverse mortgage.