When does a reverse mortgage have to be paid off?

One of the great features of a reverse mortgage is that the loan does not have to be paid off until the last borrower is not living in the property as their primary residence. That means, as long as one of the borrowers is living on the property, no payments will ever have to be made.

Here are the events that trigger the loan to become due and payable:

  1. The last borrower moves out of the property.
  2. The last borrower passes away.


In both cases, the borrower or family needs to assess the value of the property and the balance of the loan. If there is equity in the house, then the property should be put on the market for sale or if the family wants to retain the property, they will obtain their own financing to pay off the balance owed on the reverse mortgage.

If the heirs decide to sell, then at the close of escrow, the loan will be paid off…the same as any other mortgage…and the remaining proceeds will go to the borrower or heirs.

If there is no equity, then the bank should be contacted to let them know they can have the property back. Remember that when the bank takes back the property there is no recourse to the property or heirs.

In either situation, the bank should be immediately notified. They will be more likely to work with you, allowing ample time to market and sell the property…Remember, communication is the key.

One last tip: many times I get calls from families or realtors asking what is owed on the property. Always refer to the last reverse mortgage statement. The statement will give you that amount. The deed of trust will always have an amount higher than the actual loan amount…and that is not the amount owed back.

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