Reverse mortgages are becoming more popular as a way for older people in the U.S. to get money for retirement but still live in their own homes. This is because the stock market has become more unpredictable, while the housing market has stayed hot.
According to data from the US Department of Housing and Urban Development, the number of home equity conversion mortgage loans increased by 26% in March. Even though it was lower than the average number of loans made each month over the last three years, it was still well over 6,000 in April, even though it went down by 3.8%. At the outset of the procedure, a reverse mortgage calculator is required.
When Is It Possible to Terminate a Reverse Mortgage Loan?
Most of the time, you have three business days after the closing of a reverse mortgage to back out of the deal without having to pay fees or face other penalties. This is called “rescission,” and you have the right to do it. If you want to cancel, you have to let the lender know in writing. Send your letter by certified mail and ask for a return receipt so you can keep track of when you sent the cancellation notice and when the lender got it.
Make sure to keep a copy of everything you send or receive from your lender. If you decide to cancel the reverse mortgage loan, the lender has 20 days to give you back any of the money you’ve already paid toward the loan. If you want to cancel the loan after the first three days, you should talk to a lawyer to find out if you have the right to do so.
Reverse Mortgage Challenges as an Inheritance
If you get a house that has a reverse mortgage on it as an inheritance, it could be hard in a number of ways. It is up to the inheritors to decide if they will pay off the reverse mortgage with their own money (or with another loan) and keep the property, or if they will sell the house and use the money from the sale to pay off the rest of the reverse mortgage.
If they ever decided to sell the house, they would never have to worry about owing more than the house is worth (at least on HECM loans). If the money from selling the property is less than what’s still owed on the reverse mortgage, the FHA mortgage insurance will make up the difference.
Most of the time, heirs have a month to pay off an outstanding loan. In some situations, you may be able to submit a request for a one-year extension. The lender may agree to your request if you are actively trying to sell the house or if you are working to get financing. However, you will need to show proof to support your request. This information is mostly about loans that are backed by the federal government, but lenders may also make exceptions for mortgages that are privately held.
The lender has the right to take the property back if the heirs don’t pay back the debt within the agreed-upon amount of time.
How to Stay Clear of Reverse Mortgage Scams
In the past, reverse mortgages have been used to take advantage of people who own their own homes. People who are being targeted often don’t know that they need to keep paying for things like property taxes, insurance, and repairs to their homes. This means that the people can’t pay back the loan, which makes it easy for the dishonest lender to get paid.
Other types of scams include convincing borrowers that they should invest the money they get from the reverse mortgage in risky schemes, using the money to buy and sell properties, or making large, unnecessary repairs to their homes. (Most of the time, the second type of scam is run by shady contractors and construction experts.)
- Consult with a HUD-approved reverse mortgage counselor who is not affiliated with your financial institution.
- Make sure you read the fine print on any loan agreements before you sign them.
- There is a three-day cancellation period after closing to cancel your reverse mortgage loan if you change your mind about it for any reason. In order to be reimbursed for any interest or fees that you have already paid on your loan, you will need to make a formal request to your lender.
- Be wary of any unsolicited advertisements or phone calls from strangers.