A reverse home loan, often referred to as a Home Equity Conversion Mortgage (HECM), can provide significant financial relief for homeowners aged 62 and older, allowing them to access the equity in their homes while still living in them. However, what happens to this loan once you move out of your Washington home is a critical consideration.
When you move out of your home, whether it's to a retirement community, to live with family, or due to other circumstances, the reverse mortgage becomes due. This is because reverse home loans are structured around the borrower occupying the residence as their primary home. Here’s a detailed look at the implications of moving out and what steps you should expect to follow.
First and foremost, the lenders typically require that the borrower must reside in the home for at least six months of the year. If you move out for an extended period or change your primary residence, the loan agreement is effectively breached. Consequently, the full amount of the loan becomes payable.
After transitioning out of your Washington home, your heirs or the estate will have several options to handle the reverse mortgage. One option is to pay off the loan amount, which can be done using personal funds or through the sale of the home. If the home is sold, the proceeds can first be used to settle the loan, and any remaining funds can be inherited by your heirs.
Another option is for heirs to refinance the reverse mortgage into a traditional mortgage. This method allows them to keep the property and continue paying off the home without needing to come up with a lump sum of cash immediately. It's essential for heirs to understand that the amount due is based on the outstanding loan balance, which could potentially grow over time due to interest accumulation.
For homeowners planning to move, it’s wise to notify your lender about your intentions. Open communication can prevent misunderstandings and allow for a clear understanding of the next steps. Should a homeowner move due to health reasons or other hardships, there may be programs and resources available through the lender or housing authorities in Washington that could provide assistance.
It’s also crucial to consider the current market value of the home. If your home has appreciated significantly, it may provide a larger payout once it’s sold, potentially leaving your heirs with a comfortable inheritance after the loan is repaid. Conversely, if the market has dropped, the selling price may be less than what is owed on the reverse mortgage. This situation can complicate things, highlighting the importance of monitoring market conditions and consulting with real estate professionals.
In summary, moving out of your Washington home after taking out a reverse mortgage triggers specific financial obligations. Understanding these obligations, informing your lender, and considering your heirs’ options are essential to navigating this transition smoothly. Always seek advice from financial advisors or real estate experts familiar with reverse mortgages to ensure you and your heirs are prepared for potential outcomes.
