If you need a certain amount of money, such as for a specific repair or a tax obligation, then a single-purpose reverse mortgage will be the most cost-effective choice for you but you should be having all the reverse mortgage information, provided that you can find one. If you have a high-value property and require more money than the home equity conversion mortgage (HECM) lending maximum of $970,800, then the only choice you have is to obtain a proprietary reverse mortgage. If neither of those conditions applies to you, then the conventional home equity conversion mortgage (HECM) is the most suitable choice for you.
Is it possible for a home to fall into foreclosure when it has a reverse mortgage?
Yes. A homeowner who has a reverse mortgage on their home runs the risk of having their home foreclosed on if they vacate the property, fail to keep it in good repair, fail to maintain current homeowners insurance on the property, or fail to pay property taxes. Even if a homeowner must leave their house involuntarily (for example, because of an extended stay in a care facility), if they are absent from the property for more than a year, then the reverse mortgage becomes due. If the homeowner cannot make their payments, the property will be put up for foreclosure.
What will happen to my home's reverse mortgage when I pass away?
The balance of the reverse mortgage is owed once you have passed away. Your heirs have three options for paying off the reverse mortgage: using their own money, refinancing the property, or having the lender sell the house to cover the outstanding balance. If your heirs choose to pay off the mortgage using their own money, they will receive the proceeds from the sale of the house.
What It All Comes Down To
With the help of the equity they have built up in their houses, homeowners who are at least 62 years old can tap into a source of income with the help of a financial product known as a reverse mortgage. They may come in helpful in the event that your financial circumstances shift and the cost of living goes up for you.
In spite of the fact that reverse mortgages come with a number of advantages, including the possibility of receiving a consistent income from the loan without the obligation to make repayments until you pass away, move out of the house, or sell it, it is imperative that you perform adequate research before deciding whether or not to get one. Also, before you make any decisions, investigate your options, which may include home equity loans and home equity lines of credit (HELOCs).
You should keep in mind, however, that because the value of your home is probably quite high (which is one of the reasons you should pursue a proprietary reverse mortgage), you might also want to consider whether or not moving into a smaller home would allow you to achieve your objectives and still leave you with a greater amount of equity.