I am told that a reverse mortgage loan is due and payable when the borrowers no longer occupy the property as their principal residence or fail to comply with the loan agreement.
The loan must be repaid in one payment - either from the sale of the home or through other resources. There is no requirement that the property be sold, only that the loan is repaid.
I would guess that converting to a rental would trigger the loan repayment provisions in the note.
Hey guys and gals,
Need an answer to this one. By the way I have already checked the archives. Here we go.
What is a Reverse Mortgage and how does it work? i have a slight idea but it isn’t the sort of thing i want to guess on, ya know? I have a seller who called me on a letter I sent out 2 years ago, now I am a believer in direct mailing, her property has a reverse mortgage on it. Do these work just as well using a L/O as an exit?
Okay I’m starting to get ahead of myself, but I would appreciate any input from more knowledgeable individuals.
Nate(DC) has given you a good answer. Now, if you really want to pursue this, you should read over and understand the mortgage or deed of trust document and the promissary note. Then you will see what could happen.
My guess is this makes sense only if you can buy for less than market value and then resell the property or buy it all cashb or with a new loan.
Re: seller has reverse morgage - Posted by Nate(DC)
Posted by Nate(DC) on August 28, 2002 at 21:00:35:
Reverse mortgage:
Owner gets cash, either a lump sum or monthly payments.
NO Payments are due while the owner is alive and living in the house.
IF the owner dies, or sells the house, the loan must be paid off…
I am not sure what would happen if the owner tried to rent the house. They should probably call their lender and ask. My guess is that they can call the loan due if the owner decides to rent the place out.
Hi Wayne…I thought you were in Wayne, PA which is where I grew up…ah, well. A reverse mtg is when the seller owns there house free and clear or with a small balance and takes out a mortgage to get some cash, almost like an equity loan, but it’s only for seniors and I believethe loan guarantees them monthly payments of xxx for life then the bank owns the house (I think). I have no idea how it would work on a L/O (i don’t think it would. If the archives don’t have anything, check the Fannie Mae web site at least for the full explanation.