Posted on: 13th Jul, 2007 12:29am
Reverse mortgage loan is a wonderful financial innovation that is aimed at helping the senior citizens in the country to live happily. If your age is over 62 then you may qualify for this loan. Here you don’t have to make any payment. Instead payments are made to you but at the cost of reduced home equity. You may get the funds on a monthly basis, in the form of lump sum amount or through a line of credit. However you may be unaware of what happens when the reverse mortgage has to be repaid. There are mainly two cases when the loan becomes due and reverse mortgage repayment has to be made -
In such situations, the loan amount has to be repaid along with the interest payment. One common way to repay the loan is to sale the house and use the sale proceeds to repay it. If something is left over after paying off the reverse mortgage loan, then that amount is paid to the homeowner or his/her heirs. However, the value of the house may depreciate also and the sale proceeds may not cover the loan amount. In that case, the lender has to incur the loss.
- The home owner has died.
- The homeowner has relocated to a new home
In such situations, the loan amount has to be repaid along with the interest payment. One common way to repay the loan is to sale the house and use the sale proceeds to repay it. If something is left over after paying off the reverse mortgage loan, then that amount is paid to the homeowner or his/her heirs. However, the value of the house may depreciate also and the sale proceeds may not cover the loan amount. In that case, the lender has to incur the loss.
Posted on: 13th Jul, 2007 12:29 am
What happens if a borrower is unable to pay back the reverse motgage loan?
The lender will take back your property.
Hi Deborshi,
For a reverse mortgage, repayment of the loan is not required until you (or the last surviving spouse) permanently leave the home as a primary residence. If you are unable to pay your property taxes and insurance, then a special set-aside from your reverse mortgage can be created. For that, you need to talk to the lender who will find the right solution for you.
For a reverse mortgage, repayment of the loan is not required until you (or the last surviving spouse) permanently leave the home as a primary residence. If you are unable to pay your property taxes and insurance, then a special set-aside from your reverse mortgage can be created. For that, you need to talk to the lender who will find the right solution for you.
Deborshi, please go through this page more information about reverse mortgage loans: http://www.mortgagefit.com/reverse.html
Miller
Miller
Reverse Mortgage is A special type of loan used to convert the equity in a home into cash. The money obtained through a reverse mortgage is usually used to provide seniors with financial security in their retirement years.
Investopedia Says: The reverse mortgage is aptly named because the payment stream is reversed. Instead of the borrower making monthly payments to a lender, as with a regular mortgage, a lender makes payments to the borrower. While a reverse mortgage loan is outstanding, the borrower owns the home and holds title to it, without having to make any monthly mortgage payments.
Investopedia Says: The reverse mortgage is aptly named because the payment stream is reversed. Instead of the borrower making monthly payments to a lender, as with a regular mortgage, a lender makes payments to the borrower. While a reverse mortgage loan is outstanding, the borrower owns the home and holds title to it, without having to make any monthly mortgage payments.