When Do I Have To Pay Back My FHA Reverse Mortgage?

June 2, 2009

While it's true that no FHA reverse mortgage or HECM payments are due when you are approved for the loan, the terms of HECM state the loan is due in full if you sell the home. But that's not the only circumstance that could send your loan officer out to collect. Did you know there are four other "triggers" that could cause an FHA reverse mortgage to come due before you sell the home? These triggers are nothing to worry about as long as you fully understand them and prepare accordingly.

FAILURE TO PAY

If you don't pay your property taxes, hazard insurance or don't live up to your obligations as spelled out in your FHA reverse mortgage agreement, the lender has the right to call in your loan. For specific terms, ask your loan officer; be sure to get the full details before you sign any paperwork. You should understand all technical details such as grace periods, methods of appeal or what to do if you have financial problems that keep you from paying property taxes on time.

MOVING TO A NEW PRIMARY RESIDENCE

If the FHA reverse mortgage property stops being your primary residence, you are required to pay your FHA HECM loan. Your FHA reverse mortgage loan contract spells out what is considered as a "move to a new primary residence". Again, ask your loan officer for help. Find out what the bank considers a summer home versus a primary residence. Do you know how long you can stay in a summer home or even an RV before you're in breach of your FHA reverse mortgage contract?

BEING OUT OF THE HOME FOR A YEAR OR MORE

This is a very important factor. Most people go into FHA reverse mortgages with every intention of staying in the property as their primary residence. But what happens if you get sick or injured and require extended care? A one-year stay in a nursing home or assisted living facility may be necessary, but it also means your FHA HECM loan will come due. The best way to anticipate this issue is to ask your loan officer for advice on adding a second resident (living on the property) to your FHA reverse mortgage. Remember, if there is more than one borrower on the FHA reverse mortgage, the age and credit report of the youngest person is a determining factor in how much money you can borrow.

ALLOWING THE PROPERTY TO DETERIORATE

An extended stay away from the home may not be in violation of your FHA reverse mortgage agreement, but if the property falls into disrepair while you are gone, your FHA loan could be called in. Anything can happen while you are gone, from storms or natural disasters to vandalism or other damage. It's important to have someone look after your investment while you are away. You'll keep your FHA mortgage from coming due and get some extra peace of mind in the bargain. The FHA and your loan officer have guidelines spelling out what's required to keep your home in good repair.