Can You Pay Off a Reverse Mortgage Early? Yes...and Here’s How
For qualified applicants, a reverse mortgage can be a smart financial tool to help you live the retirement lifestyle you deserve. By leveraging the funds amassed in your home equity, you can free up cash to supplement your income, cover medical expenses, renovate and so much more.
And unlike traditional home equity loans, reverse mortgages don’t require monthly payments. You can pay as little or as much as you want, when you want. In fact, you may even pay off the loan early with no repayment fees .
Life events that trigger a repayment
The following scenarios can result in an immediate obligation to repay a reverse mortgage:
- The borrower no longer resides in the home as their primary residence
- The borrower passes away
- The borrower sells the home
- The borrower fails to keep up loan obligations, including living in the home as their principal residence, maintaining home upkeep and paying property taxes, and homeowners insurance
Related Article: A Quick Guide to Your Loan Obligations
At any point during the life of the loan, a borrower may simply decide they want to repay the loan for various reasons. And if you have a change of heart immediately after obtaining a reverse mortgage, you are protected by the right of recission. This means you have a three-day period directly after you close on your loan in which you can cancel the transaction.
The payback process
Once you’ve completed the process of obtaining a reverse mortgage, there will come a time when you want or need to settle or pay off the loan. Whether it’s the borrower or the heirs handling the repayment, options include:
- Selling the home. In this case, you use the sale proceeds to pay off your loan. Neither the borrower or heirs will have to pay more than the value of the home when the loan is repaid, because a reverse mortgage is a non-recourse loan.
- Refinancing the loan into a traditional mortgage. This option allows you to preserve the remaining equity in the home, while avoiding a sale to pay off the loan.
- Using your personal savings. If you have the funds at your disposal, you may use them to repay your reverse mortgage.
When deciding the best course of action, it’s important to sit down with your financial advisor or a reverse mortgage specialist for guidance on your personal situation.
Once your decision is made, contact your lender and choose a date to pay off the mortgage. You’ll receive a payoff statement that includes all the payments made, interest accumulated and costs associated with your loan.
If you’re selling the home, let your homeowners insurance agent know the expected payoff day. You may be reimbursed if you’ve already paid for the year. You’ll also want to contact the title company, as you may be entitled to a prorated rebate of mortgage insurance premiums.
The knowledge you need to make an informed decision
As with any financial commitment, a reverse mortgage requires careful consideration and education to ensure it’s the right decision for you and your family. The loan specialists at Reverse Mortgage Funding (RMF) are standing by to answer your questions. Give us a call today at (888) 277-1567 to set up an appointment.
In the meantime, access this guide on how to retire more freely.
This content is sponsored by RMF, one of the nation’s leading reverse mortgage lenders. We are dedicated to helping older Americans retire more freely, in the comfort of their own homes. As a result of our commitment to providing an extraordinary and positive customer experience, we have earned a 98% customer satisfaction rating; a 4.5-star / Excellent score on Trustpilot; 4.8 out of 5 stars on LendingTree; and an A+ rating with the Better Business Bureau. Call 888-277-1567 to speak with a licensed reverse mortgage specialist to learn about our retirement financing products and solutions