Does A Reverse Mortgage Enable The Bank To Take My Home?


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With the flood of foreclosures in recent years, it is understandable to be concerned about losing your home if you have a mortgage. However, with a reverse mortgage, your home is protected from foreclosure or repossession by the bank as long as you meet the criteria of the loan. The good news is that is that these requirements are as simple as living in the home, paying the necessary taxes and hazard insurance. Beyond these nominal stipulations, homeowners that have a reverse mortgage have very little risk of losing their home to the bank.

How Reverse Mortgages Are Paid

It is estimated that 70,000 people a year take out reverse mortgages on their homes. These loans are designed to help older homeowners over the age of 62-years of age tap into the equity they have gained in their homes to use toward retirement, medical expenses or anything they choose. Reverse mortgage loans are regulated by the Department of Housing and Urban Development (HUD) and other agencies to ensure that these consumers are protected from losing their homes to predatory lenders.

Reverse mortgages have strict guidelines to ensure that a homeowner only uses the equity available in the home, taking into consideration interest that will accumulate on the loan over time. This allows the homeowner to live in the home without needing to make loan payments on the home. The loan is paid when the homeowner is no longer going to live in the home, either paid through the sale of the home when they decide to move or after they have passed on. Heirs of the deceased with the reverse mortgage can either refinance the home in their names to pay off the reverse mortgage or sell the home to pay off the loan.

Reverse Mortgage Requirements

Even though reverse mortgages are protected from foreclosure from non-payment, there are requirements that must be met while living in the home. The lender must protect their investment by ensuring that the home is insured and that the taxes on the property are continued to be paid. Reverse mortgages generally require that homeowners continue to carry hazard insurance on their home, protecting the value of the home against fire and other disasters. In addition, property taxes remain the responsibility of the homeowner as long as they still own the home. Not meeting these requirements could put a reverse mortgage loan in default and in these rare circumstances, the loan could become due and payable.

For most homeowners, a reverse mortgage is a safe and low-risk option to access the money that is tied up in the home they live in or to buy a new home later in life. Especially for those on a fixed retirement income, it can be a great way to ensure that they can keep their home without needing to pay a monthly mortgage payment. There are very few requirements to ensure the loan stays in good standing and no financial obligation to pay the loan back while the homeowner is still living in the home. This security can relieve many financial worries, allowing these older homeowners to enjoy their hard-earned retirement.

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