Pay Off a Reverse Mortgage, or Maybe Not?
Briefly, a reverse mortgage is for senior home owners aged 62 or older, used to convert their home equities to cash. A lender would determine the value of your home and provide you with the money. You need not pay it back until you sell, move out of the home or pass away.
What are the ways to pay off an existing reverse mortgage if you do not have the access to the cash required?
You can sell the home, and the buyer’s money will pay off the reverse mortgage lender. If you do decide to pre-pay the reverse mortgage early, it may be possible to do so with no prepayment penalties.
If you die, then your reverse mortgage loan becomes due for payment. Your heirs need to pay off the dues if they want to keep the home which has the reverse mortgage on it. Or the lender will have to sell the home in order to get back the money.
But there are very few times when it makes sense to consider an early payoff on an existing reverse mortgage. This is because you are not making any monthly payments in the case of a reverse mortgage. loan In fact, the lender pays you monthly while you continue to enjoy living in your own home.
A reverse mortgage is a non-recourse type of loan. If you move from your home or sell it off then the reverse mortgage becomes due. You never have to pay more than the value of the home, even if the loan amount is larger. This tends to protect you and your heirs from owing more than the home is actually worth.
So the answer to the question is; it does not make much sense to pay off a reverse mortgage unless you are selling the home, or are moving to a different home.