Senior citizens whose post-retirement income is not enough to meet expenses could face financial pressure. Most of the senior people today don’t live with their children after retirement as was the case in the past. The reverse mortgage for senior program was launched by the Feds for people over the age of 60 to supplement their monthly income.
The reverse mortgage program is opposite to the traditional mortgage program in that the payment is made by the lending company for equity in the house. An important question regarding this loan is that how is the loan settled after the end of the term. That’s what we will discuss in this article.
About Settlement of a Reverse Mortgage of Senior Loan
A reverse mortgage loan is suitable for senior persons who have paid all or major portion of their home’s mortgage. The loan amount does not become due at any specific period. It is settled only once the homeowner who obtained the loan passes away, or moves out and sells the house. Also, the heir of the person won’t be required to repay the loan amount from their own financial resources.
If the sale proceeds are lower than the net accrued loan amount, the loss is borne by the lender. The loss would not happen in case the lender was accurate in the estimation of the house property resale value.
Keep in mind that if the borrower outlives the tenure of the loan, he or she could continue to live in the house. However, the lending institution ceases monthly payments. They cannot legally claim the loan amount until the house is sold.
