Is your reverse mortgage due?
I have previously discussed the basics of a reverse mortgage and determined that it allows borrowers age 62 or over to access a portion of their equity, and eliminate principal and interest payments for the rest of their lives, or until they move out of the home permanently. We’ve also learned that the money which may have to be drawn is tax-free, and the methods for receiving payments are very flexible. A reverse mortgage (RM) may increase your monthly cash flow by allowing you to access your home’s equity without selling your home. You also remain on title and your heirs will inherit your home and will not be stuck with your debt after you pass away, because of a non-recourse clause protecting the parties to the mortgage, including the heirs.
You may also use an RM to “purchase a home,” so let’s talk about what happens when the mortgage becomes due. Like any mortgage, it will eventually become due and payable. The question becomes, whenwill you pass away or move out of the home permanently? In theworld of the home-equity conversion mortgage, this is referred to as a “maturity event.”
You’re able to pay off your RM at any time, or when you reach a maturity event; this occurs, and the loan has to be repaid, if you fail to maintain the home; fail to pay your property taxes, homeowners insurance, or HOA fees and there are no more options to bring the loan current; orwhen you sell your home, convey your title to another party, or you pass away or move outside of the principal residence for a period in excess of 12 months due to physical or mental illness. No further funds will be disbursed after a maturity event occurs.
I always recommend communicating with your loan servicer. He or she is there to answer questions and clarify the path you need to take in regard to your RM, and howtomove through the end of the loan process. Keep the phone number and/or email address to your loan servicer handy. The contact information will be in the documents you received at your title-company closing of your reverse mortgage.
It’s important to note that loan servicers audit death records, and many of the maturity event deadlines are based on the borrower’s date of passing away, not the date the loan servicer is notified. Your servicer will mail a “Due and Payable” letter, and it will give the specifics on balance due, options for paying back the mortgage, days to respond, and options to avoid foreclosure.
If you happen to pass away without heirs, the loan servicer will need to take legal ownership to dispose of the property, and if there are heirs involved, it’s important that the heirs meet the required deadlines and stay in contact with the loan servicer.
The moral of this story is Stay in Touch! And please contact your loan servicer for more information on this topic.
Dirk Gray is a reverse mortgage specialist with Frost Mortgage, an accredited instructor for the New Mexico Real Estate Commission. Opinions expressed are solely my own, and do not express the views of my employer, the Financial Institutions Division of the N.M. Regulation & Licensing Department. I can be reached at 505-9301953, firstname.lastname@example.org, and YourNewMexicoReverseMortgage.com.