Personal finance website Money.com is offering basic product information and a series of frequently asked questions about reverse mortgages, but is also aiming to provide information to potential borrowers about what happens at the end of a reverse mortgage when a borrower leaves the home.
“Inheriting a home with a reverse mortgage attached to it can be challenging,” the column reads. “Heirs must decide whether to pay off the reverse mortgage out of pocket (or with another loan) and keep the property or sell the home and use the sale proceeds to repay the balance.”
It goes on to describe the nature of the non-recourse feature of a Home Equity Conversion Mortgage (HECM) as sponsored by the Federal Housing Administration, and when FHA insurance would kick in should the loan go underwater.
The column also describes how heirs typically have 30 days to pay off the loan balance after the borrower leaves the home, and the extension that can be requested for up to a year in the case of a HECM. It also describes how to “get out” of a reverse mortgage.
“There are many ways to get out of a reverse mortgage. If you’re within three days of closing, you can exercise your right of rescission and cancel your loan,” the column explains. “You’ll need to do this in writing, but once received, your lender has 20 days to refund your costs and fees.”
Getting out of the loan after that time allows for a borrower to pay off the loan balance as they see…
