At the maturity of a reverse mortgage loan, the lender will have a claim against your property and you or your heir(s) may need to sell the property to repay the loan, or repay the loan from other assets in order to retain the property.
The lender will charge an origination fee, a mortgage insurance premium, closing costs and/or servicing fees, which fees will be added to the loan balance.
The balance of the mortgage loan grows over time as interest is added to the loan balance. As long as you comply with the loan terms, you will retain title to the property until you sell or otherwise transfer the property, and therefore you are responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts may cause the loan to become due and may subject the property to a tax lien or other encumbrance and/or to foreclosure.
Interest on a reverse mortgage is not deductible from your income tax until you repay all or part of the loan.
Before obtaining a reverse mortgage, you should consult a trusted financial adviser or planner. There are government agencies and nonprofit organizations that can give you information about reverse mortgages. You can locate these resources at:
- https://www.consumer.ftc.gov/articles/0192-reverse-mortgages;
- https://www.irs.gov/faqs/other/for-senior-taxpayers/for-senior-taxpayers; and
- https://www.consumerfinance.gov/about-us/blog/consumer-advisory-dont-be-misled-by-reverse-mortgage-advertising
Please note that before you can complete an application for a Federal Housing Administration-insured Home Equity Conversion Mortgage loan, you must undergo counseling with a counseling agency approved by the U.S. Department of Housing and Urban Development (“HUD”). Your loan originator will provide you with a disclosure of available HUD-approved counseling agencies.