Seniors with net worth that is mostly based on the value of their property may be able to get cash via reverse mortgages. For homeowners who are 62 years of age or older and have a sizable amount of home equity, a reverse mortgage is a loan. These older citizens are given the opportunity to borrow money using the equity in their homes and receive payments in the form of a lump amount, a set monthly payment, or a line of credit. When the borrower passes away, vacates the property permanently, or sells it, the whole loan sum becomes due and payable.
One reverse mortgage is allowed at a time, and it must be secured by your principal house. Although this term is used quite loosely, it typically means that you must spend at least half of the year residing at the residence. The restrictions are a little bit more flexible if you have to spend time in a healthcare institution; in this scenario, you may be away from home for up to 12 consecutive months before your reverse mortgage is due.
Understanding these guidelines is crucial because if you are gone from your home for an extended period of time, your reverse mortgage may become due and you may be required to sell your property in order to make the repayments. We’ll walk you through all you need to know in this post.
- Only your main house may be used to get a reverse mortgage, which is commonly considered to entail that you must spend the most of the year there.
- Your lender has the power to cancel your loan if you are gone for more than six months on vacation or more than 12 months straight due to illness.
- If you’re going on a long trip or will need to be in a hospital for a long period, let your lender know. If not, they could believe you’ve relocated and cancel your reverse mortgage loan.
Understanding Residency Rules for Reverse Mortgages
The home on which you hold the reverse mortgage must be your primary residence, which means it must be the place you spend the bulk of the year, according to the requirements for reverse mortgages. You are only permitted to have one primary home at a time, according to the regulations.
The regulations are silent on how long a borrower must be absent from the home before the lender may call in the reverse mortgage loan, however. In other words, your lender has the option to decide how long you may remain gone from your house before the reverse mortgage expires.
How long you may be absent from your house before your reverse mortgage becomes due may be governed by particular, comprehensive criteria set out by your lender. The Consumer Financial Protection Bureau (CFPB) has, nevertheless, also released broad advice on this matter. These suggestions are as follows:
- You must let your lender know that you are staying at your primary house if you are gone for more than two months but less than six months. By doing this, you may steer clear of problems with the residence requirements for reverse mortgages.
- You may no longer claim a property as your primary home if you are absent from it for more than six months for non-medical reasons. Your reverse mortgage will then become payable as a result.
- If there is no co-borrower residing in your house and you are gone for more than 12 consecutive months in a healthcare institution such a hospital, rehabilitation center, nursing home, or assisted living facility, you will also be treated as having left your permanent residence. Your reverse mortgage loan also becomes due at this point.
If a co-borrower resides in the property, the regulations are somewhat altered. Many married couples name both partners as co-borrowers on the reverse mortgage forms. By doing this, you may steer clear of issues. Even if you permanently vacate the home, one co-borrower may continue to remain there and continue to satisfy the reverse mortgage requirements as long as they are receiving loan payments.
Make sure to include them as co-borrowers when you apply for a reverse mortgage if you reside with your spouse or other family members who are 62 years of age or older. This implies that if one of you must relocate to a healthcare institution for more than 12 continuous months, you won’t be required to sell your home.
Some borrowers have problems with their reverse mortgage when away from home for a lengthy period of time—whether for a vacation or for health reasons.
Let’s take an example where a couple shares a house but only one of them is named on the reverse mortgage paperwork. The debt will become due if this individual has to stay in a hospital (or nursing home) for more than 12 months in a row. This may require their spouse to vacate the property and sell it in order to pay off the debt. It’s crucial to include your spouse when applying for a reverse mortgage in order to prevent this problem.
The obligation to demonstrate that you dwell in your primary house for the majority of the year gives rise to another frequent problem. The majority of lenders will demand that you confirm annually that your house is your primary residence. This is often accomplished by the mailing of a postcard or other reminder around the same time each year. You must promptly sign and submit your yearly occupancy certification. If you don’t, your lender can assume that you’ve left the property and potentially begin the foreclosure process on your house.
Must a reverse mortgage be on a primary residence?
Yes. Only main residences—generally speaking, the home where you spend the most of the year—are eligible for reverse mortgage loans. For the duration of the loan, the borrower of a reverse mortgage must occupy the property as their principal home.
How long can I be away from home with a reverse mortgage?
According to the regulations, a home cannot be considered your primary residence unless you occupy it for a significant portion of the year. This implies that you are not permitted to travel for more than six months at a time without a valid cause. You may remain away from home for up to 12 months straight if you need to visit a hospital (or other healthcare institution) before the loan is due.
Can I move from a house with a reverse mortgage?
Your loan will become due if you sell the home on which you have a reverse mortgage. This implies that you must sell your home or find another method to get the money necessary to repay the remaining amount of your loan.
The Bottom Line
Only your main house may be used as collateral for a reverse mortgage. This normally means that you must reside at the home for the majority of a given year, even if the decision to terminate your reverse mortgage loan is completely at the lender’s discretion.
This implies that your lender has the ability to cancel your loan if you are absent for more than six months on vacation or more than 12 months in a row for medical reasons. You should let your lender know if you have long-term travel plans or if you will need to be in a hospital for a prolonged period of time. If not, they could believe you’ve relocated and cancel your reverse mortgage loan.
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