How To Get Out Of A Reverse Mortgage
Author:
Lauren NowackiApr 12, 2024
•6-minute read
A reverse mortgage can be a helpful financial tool in retirement. However, it’s a complicated loan that isn’t the right solution for everyone. Even those who did their due diligence in understanding how a reverse mortgage works may still not know how to get out of the loan if they need to.
If you’re considering a reverse mortgage loan or are looking for a way out, read on to learn more about creating an exit strategy if and when you need it. Rocket Mortgage® does not offer reverse mortgages, but we feel it’s important to offer educational information so you’re aware of all your options.
How A Reverse Mortgage Works
A reverse mortgage works by taking the equity you’ve built in your home and first using it to pay off your current mortgage. Then, you can receive the rest of the proceeds in a lump sum, in a line of credit or through monthly payments from the lender.
It’s not a traditional mortgage; instead, it pays off your traditional mortgage and you don’t have to make any payments on the loan until it comes due. However, like a traditional mortgage, you do need to continue to pay your property taxes, homeowners insurance and home maintenance costs.
Along with the financial obligations mentioned above, there are other requirements for a reverse mortgage:
- You must be at least 62 years old to get a reverse mortgage.
- You must have enough equity in the home.
- You can own the home free and clear or still have a mortgage on it.
- The home must be your primary residence.
The most common type of reverse mortgage is the home equity conversion mortgage (HECM), which is insured by the Federal Housing Administration (FHA). This can help protect the borrower. If you want a HECM, you’ll be required to go through a financial assessment that ensures you are willing and able to uphold the financial obligations of the loan. You’ll also need to attend a counseling session to ensure you understand the terms of the loan and that you must eventually pay the loan back.