REVERSE MORTGAGE PAYMENT

Who Repays the Loan?

Who repays the loan when a senior homeowner purchases a reverse mortgage? Well, that depends. Reverse mortgage loans are repaid in a much different manner than conventional home mortgages. As long as the senior borrower lives in the home as their primary residence, the balance of the loan's principal and/or interest is never paid. Once the property passes to an estate, the heirs can elect to refinance the home with a traditional home loan, to repay the loan by selling the property, or allow the reverse mortgage lender to take possession of the title in lieu of the lien. Since a reverse mortgage is a non-recourse loan, you will never owe more than the home's value at the time the loan is repaid. If the senior is not living in the home for 12 consecutive months, e.g. extended nursing home stay, then the reverse mortgage lender will require that the home be sold and the loan repaid in full.

A reverse mortgage loan or HECM ends when the owner decides to sell the home or the last person on title dies. At that point, the HECM lender will require that the loan be repaid using the proceeds from the property sale or by the heirs through a refinance or sale. Unlike a traditional mortgage, heirs have up to 12 months after the last person on title passes away to sell, refinance or pay off the mortgage without having to make a single payment. Since the Internal Revenue Service does not consider money disbursed from a reverse mortgage account to be income, the senior receives tax-free cash payments but the accrued interest charges are not deductible until either the senior repays all or part of the loan or the owner's heirs elect to repay the reverse mortgage and pocket the difference. So, a reverse mortgage, like the name implies, reverses how you or your heirs will repay the loan. Instead of making monthly house payments, the homeowner can receive monthly payments and never have to repay the loan as long as they live in their home. For additional information, contact Trinity Reverse Mortgages at 1-866-707-4664.