When you take out a reverse home loan, also known as a Home Equity Conversion Mortgage (HECM), you are essentially converting a portion of your home equity into cash, which does not require you to make monthly mortgage payments for as long as you live in the home. However, moving out of your primary residence, such as relocating from Washington State, can significantly impact the status of your reverse home loan. Understanding these implications is crucial for homeowners considering a move.
Firstly, it’s important to note that reverse home loans are designed for borrowers who intend to remain in their homes. If you move out of Washington, your status as a borrower changes. The U.S. Department of Housing and Urban Development (HUD) mandates that a reverse mortgage is only valid when the borrower occupies the home as their primary residence. Therefore, moving out may trigger the loan becoming due and payable.
If you relocate to a different state or decide to live in a care facility, the reverse home loan lender will typically require you to repay the loan in full. This repayment might involve selling the home to settle the loan balance. The proceeds from the sale will cover the amount owed, ensuring that your lender is compensated for the funds advanced to you.
Another consideration is the timeframe involved in moving. Borrowers can be absent from their primary residence for a limited period, usually up to 12 consecutive months, under certain conditions. If you plan to stay away for less than one year, your reverse loan may remain intact, and you could maintain your eligibility for the benefits associated with the loan. However, if your absence extends beyond this period, the lender may initiate the process to call the loan due.
Moreover, if you plan to move in with family or to a retirement community, it is advisable to communicate with your lender. Discussing your intentions can sometimes lead to options that might allow you to retain some financial flexibility while ensuring compliance with the loan terms.
Additionally, potential tax implications can arise from the sale of your home if using a reverse mortgage. Since the loan is generally repaid using the proceeds from the sale, it is crucial to consult with a tax professional regarding any tax liabilities that might arise from the transaction.
In conclusion, moving out of Washington while having a reverse home loan can significantly alter the terms of your mortgage. It is essential to perform thorough research and consult with a reverse mortgage counselor or real estate professional before making such a move. Understanding the obligations tied to your reverse mortgage can help you make an informed decision while ensuring that you are prepared to manage your financial responsibilities effectively.
