How long does a Reverse Mortgage last? - Heritage Reverse Mortgage (2024)

FAQs

How long does a Reverse Mortgage last? - Heritage Reverse Mortgage? ›

Your Forever Home

Unlike traditional mortgages, there's no set term length for reverse mortgages.

As mentioned above, heirs typically have 30 days after the borrower's death to repay the mortgage. However, lenders may approve a 90-day extension if the borrower's heirs plan to sell the home or obtain funding to pay it off and need more than 30 days to do so.

There are ways to exit a reverse mortgage, including exercising your right to rescission, refinancing the mortgage, paying off the loan, selling the property and signing over the title to the lender.

The problem, say advocates, is that many senior homeowners don't understand the fine print in a reverse mortgage. Some wrongly assume the lender will pay the taxes and insurance. But fall behind on those payments or fail to maintain the home, and the lender can foreclose.

If the end of your term is up before you pass away, then you have outlived your reverse mortgage proceeds. With a term payment plan, you reach your loan's principal limit—the maximum that you can borrow—at the end of the term. After that, you won't be able to receive additional proceeds from your reverse mortgage.

You risk default or foreclosure

Failing to adhere to the terms of a reverse mortgage could leave you in default on your loan. And from there, you risk foreclosure on your property. If you don't pay your property taxes or insurance premiums on schedule, you'll violate your reverse mortgage's terms.

If your reverse mortgage loan is in default and you've received a notice that the loan is “due and payable,” you may sell your home for 95 percent of its appraised value.

Selling a house with a reverse mortgage isn't as simple as selling a home with a traditional mortgage — but it can be done with a little planning. With a reverse mortgage, you borrow against the equity in your property to receive cash upfront or a stream of monthly payments.

The lender recovers the money advanced to you, plus interest, when the home is sold. If the home is sold for more than is required to satisfy the obligation, the remaining equity goes to you or your heirs.

Can I just walk away from a reverse mortgage? ›

You can get out of a reverse mortgage by using the right of rescission, selling the home and paying back the loan, or refinancing for more favorable terms. As a last resort, you can walk away by surrendering the deed.

+ With a reverse mortgage, will the lender eventually own my home? No. The borrower(s) retains title to the property. The reverse mortgage lender is merely extending a loan to the borrower.

You may not qualify for a reverse mortgage if you have bad credit, lack sufficient income, or have not undergone a mandatory counseling session. If money is tight and you're looking for options for added income, you might start wondering what disqualifies you from getting a reverse mortgage.

A USA TODAY review of government foreclosure data between 2013 and 2017 found that nearly 100,000 reverse mortgage loans have failed, burdening elderly borrowers and their families and causing property values in their neighborhoods to crater.

If the loan is not paid back, that is a default in the loan terms and like any other default on any loan, the lender would ultimately have to begin foreclosure proceedings to protect its interest if you didn't make arrangements to sell the home or pay the loan back.

The amount of money you can get from a reverse mortgage usually ranges from 40% to 60% of your home's appraised value. The older you are, the more you can receive because loan amounts are based on your age and current interest rates.

A reverse mortgage loan becomes due and payable after your death and after the death of any coborrowers or of an eligible nonborrowing spouse. Once your heirs receive a due and payable notice from the lender, they have 30 days to buy, sell, or turn the home over to the lender to satisfy the debt.

Suze Orman's opinion on reverse mortgages

She has spoken out against these loans on numerous occasions, warning that they can be a risky financial decision for many older Americans. One of Suze's main concerns with reverse mortgages is that they can be incredibly expensive.

+ Can a reverse mortgage lender take my home away if I outlive the loan? No, they cannot. And the loan is not due at that time either. In fact, you don't need to repay the loan as long as you or another borrower continues to live in the house, keep the taxes paid and insurance in force.

Older adults with significant home equity

If you have a lot of home equity, then a reverse mortgage can be a useful way to turn that into cash without taking on extra monthly payments. You can then cover expenses or supplement your existing retirement income.