Reverse Balance Exceeds Home Value

How are you affected if my reverse mortgage loan balance becomes larger than the value of my Ashland
Oregon property?

This will depend upon which type of reverse mortgage you may have. The vast majority of reverse mortgage loans these days are insured by the Federal Housing Administration (FHA), as part of its Home Equity Conversion Mortgage (HECM) program. An FHA-insured HECM loan is a non-recourse loan. Which means that if your home is sold to repay the mortgage, neither you nor your family members shall be required to pay greater than the sales price of the home. The insurance will pay for any deficiency, provided that your home sells for no less than 95 percent of the the latest appraised value.

Should your heirs wish to keep your house after you pass away (or vacate entirely) rather than selling the property, they’ll have to pay off the house loan. They will not have to pay off more than the home is appraised for. In case the mortgage balance is greater than your home is valued at, they will only have to pay 95 % of the present appraisal value of your house. The FHA insurance covers the rest. (Should the home loan balance is less than the value of your house, they will just need to pay the loan balance).

Tip:

Your heirs could possibly pay off the required 95 percent by getting a conventional house loan. Nevertheless, they’ll still have to satisfy the standard conditions for getting a new mortgage. For instance , having a down payment, possessing a reliable income, and passing a credit check. Considering that obtaining a new mortgage to retain the property takes planning, it’s a good idea to talk this over with your loved ones.

Exclusive (non-FHA insured) reverse home loans undoubtedly are a different story. These could include different loan terms. So if you have, or are looking at, a proprietary loan in Ashland OR you should understand the provisions very carefully.