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5 Ways to Get Out of a Reverse Mortgage

5 Ways to Get Out of a Reverse Mortgage

house and money icon, real estate lawyer

There are various options available to homeowners who decide to get out of their reverse mortgages. Aside from dying or selling the home, borrowers can exercise their right of recission, repay the loan balance, refinance with a conventional mortgage, tap into their savings, or choose another reverse mortgage. When deciding which option to choose, the length of time since the money was borrowed and the consumer’s overall financial situation play an important role.

Indicators that a Reverse Mortgage is No Longer Viable

For some borrowers, it may make sense to get out of their reverse mortgages. Since reverse mortgages require borrowers to use the home as their primary residence, those who are unable or unwilling to live in the home may need to cancel their reverse mortgage.

Some families need to get out of reverse mortgages for estate planning purposes. For owners who want their relatives to have the home after they die, opting out may be a good choice. The balance of the loan becomes due when the last borrower or eligible spouse of a borrower moves out, sells the home, or passes away.

Homeowners who discover a better deal elsewhere may wish to get out of their current reverse mortgages so they can get lower payments, better interest, or a more flexible repayment plan.

Fortunately, buyers who wish to terminate a reverse mortgage have options.

Three Day Rule

The “right of rescission” gives a borrower up to three days after loan signing to cancel a reverse mortgage for any reason without penalty. To exercise the right of recission, borrowers must notify their lenders in writing.

Repaying the Loan Balance

Borrowers may repay the principal and any owed interest at any time to cancel a reverse mortgage without penalty.

Paying off the Reverse Mortgage with a Conventional Mortgage

Borrowers can also pay off their reverse mortgage with a conventional mortgage. A borrower’s ability to take out a conventional mortgage depends on their debt to income ratios, their credit history, and the home’s value.

Tapping into Savings

Some homeowners may be able to tap into their savings to repay their reverse mortgages. If the interest on their reverse mortgage is costing them more than they are making with their investments, this may be a good choice.

Taking Another Reverse Mortgage

If better terms are available with another reverse mortgage, buyers can pay off their current loan and start fresh.

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