How Long Does a Reverse Mortgage Last?

When Does a Reverse Mortgage End?

Reverse mortgages were designed to allow seniors to stay in their homes through their retirement. This is sometimes called “aging in place.” Because there’s no way to know when a borrower will die, reverse mortgages don’t have a set term length.

However, in some circumstances, a reverse mortgage is terminated while the borrower is still alive. These are four common situations when a reverse mortgage ends, and the loan balance becomes due:

The Borrower Dies

Once a reverse mortgage borrower dies (or if there are two borrowers, once the last surviving borrower dies), the reverse mortgage ends, and the loan balance must be repaid.

The Borrower Sells the Home

Most of the time, reverse mortgage borrowers intend to remain in their homes for the rest of their lives. However, plans can change. If a borrower sells the home, the reverse mortgage ends. The borrower then uses the proceeds from the sale of the home to pay off the mortgage balance.

The Borrower Moves Out Permanently

Even if a borrower still owns the home, the reverse mortgage will be terminated if they permanently move out. Most loan contracts specify that if the borrower does not live in the home for a year or more, they are considered to have permanently moved out.

For instance, if a borrower intended to age in place but needs to move into a nursing home, the reverse mortgage will end.

The Borrower Fails to Meet Loan Obligations

To keep receiving payments (and to prevent the loan balance from becoming immediately due), a borrower must follow all loan requirements. If they don’t, the reverse mortgage will default.

These are some of the most common ways that borrowers fail to meet their obligations:

• Not paying property taxes
• Not keeping the property in good condition
• Not paying homeowners’ insurance premiums

Defaulting on a reverse mortgage has the same consequences as defaulting on a traditional mortgage. The lender can foreclose on the home and sell it to pay for the remaining loan balance.

How Is a Reverse Mortgage Paid Off?

Reverse mortgages don’t require you to make monthly payments during the loan term. Instead, once the mortgage ends, the balance is due immediately. Typically, your heirs will sell the home, use the proceeds to pay off the remaining loan balance, and keep the rest of the proceeds.

But what if your heirs would rather keep the house? In this case, they would need to pay the loan balance to the lender themselves. Once the reverse mortgage has been paid, your heirs may take possession of the home.

What if the Loan Balance Is More Than the Home’s Value?

If the home’s condition suffers or its value drops unexpectedly, the balance due on the reverse mortgage might be more than the value of the home. Fortunately for borrowers and their heirs, these loans are “non-recourse” loans. 

This means that borrowers and heirs will not have to pay the lender more than the proceeds of the sale of the home. They also have the option to sign the home over to the lender. However, it’s worth noting that it’s extremely uncommon for a home to be worth less than the balance on a reverse mortgage. 

There is one caveat here. If your heirs decide they want to keep the home, they will owe the lender the full balance of the loan. This is true even if the loan balance is more than the home’s value.

Is a Reverse Mortgage Right for Your Retirement?

If you’re looking forward to a long, peaceful retirement in your own home, a reverse mortgage might be just what you need. At South River Mortgage we take the time to help you decide whether a reverse mortgage is truly your best option.

Ready to learn more? Get an instant quote here today (totally free) to get started. Then call 855-212-9114 to discuss your options with our licensed reverse mortgage experts. They will answer all your questions, no pressure or obligation.