The Termination Of A Reverse Mortgage

There are several reasons that may lead to the winding up or termination of a reverse mortgage. A reverse mortgage may fall due for reimbursement when the home owner(s) move out of their house for ever or when the home owner(s) make their mind up to sell the property. In addition, a reverse mortgage may come to an end when its set period runs out and a new termination date is agreed upon or following the death of the home owner(s). In the instance of a married couple procuring a reverse mortgage, it may terminate on the death of the surviving spouse or home owner.

The lender or mortgagee has the choice of terming the loan outstanding and seek legal action against the borrower or home owner to recover the liabilities in case the latter fails to make the repayments. At the same time, the creditor may initiate similar actions and terminate a reverse mortgage if the home owner violates any of the clauses mentioned in the agreement. For instance, a reverse mortgage may be winded up if the home owner fails to pay the property taxes or apartment charges, allows the insurance on the property to elapse or even if he is unsuccessful in maintaining the house or repair it whenever needed. On the other hand, instead of terminating the reverse mortgage or seeking legal action against the home owner, the creditor may even choose to settle the home owner's problems by recompensing for the taxes, fees, insurance premium and repairing the property. In return, the lender adds up the expenses and includes it in the reverse mortgage liabilities.

In this instance, the lender is entitled to other facilities that may lead to the termination of the reverse mortgage. For instance, the lender is entitled to apply an 'on demand' stipulation or even a stipulated utmost arrears rider. These riders enamor the lender or creditor to privilege to ask for the full repayment even before the conclusion of a fixed-term reverse mortgage. In addition, the lender also has the right to turn down the home owner's request for a supplementary restitution of the reverse mortgage.

It is important to note that the lender does not immediately get the possession of the house or property soon after the termination of a reverse mortgage. Neither, does any lender get the control of a house when a reverse mortgage begins. In fact, it is the home owner who retains his ownership over the property all through, even in the instance of his complete equity on the house being exhausted. This holds true even in the case when the liabilities surpass the assessed value of the home or property.

Nevertheless, it is essential for the home owner to pay off all the liabilities soon after a reverse mortgage ends or terminates or by the time that is mentioned in the agreement. When a reverse mortgage ends, the home owner has the option to dispose off the house to clear all liabilities or retain the house and sell other assets to repay the total debt amount, which usually comprises the principal amount and the accumulated interest charges. If the home owner does not meet the criteria for refinancing or has died, any relative who desires to retain the house in the family may organize a conventional mortgage to settle the liabilities of the reverse mortgage.

Keep off copycats

Here is a word of advice for people looking to acquire a reverse mortgage. It is warned not to confound reverse mortgage lines of credit with 'home equity lines of credit'. It may be noted here that 'home equity lines of credit' is also branded as 'home equity personal lines of credit' and even 'home equity loans'. Unlike reverse lines of credit, the home equity lines of credit are one of the conventional mortgage systems. Thus, if you go for home equity lines of credit mistaking it for reverse mortgage lines of credit, you will be required to make recurring reimbursement or repayment of the due balance. It is mandatory in this instance. In case the borrower fails to fulfill the mortgage refund liabilities, the creditor or mortgagee has the privilege to initiate lawful actions against the former to recover his lent money. What is worse is the fact that the law also entitles the lender to compel the borrower or home owner to dispose off his property to repay the loan as well as the interest charges.

It is possible that a na´ve or inexperienced shopper may sign up a contract for a home equity loan mistaking it to be a home equity conversion line of credit. In such an instance, the consumer will not only be cheated, but will also find himself in jeopardy. Now, in the place of deferring a loan reimbursement, the consumer will be confronted with a situation where he or she will need to make mandatory settlement payments. This is sure to put the unsophisticated consumer in an extremely expensive trouble. While such cases may not be uncommon in Canada, where the Canada Mortgage and Housing Corporation (CMHC), the federal housing agency in the country, is yet to introduce laws to curb malpractices by unscrupulous creditors, in the neighboring United States there are several laws that protect the consumers. The consumer protection laws in the United States have been constricted to control deceitful lending practice vis-à-vis home equity credits as well as to curb the equity scams that have been reported recently in this North American country.

Apart from what has been mentioned above, even the names or titles of some of the conventional mortgage and saving plans may also perplex people, especially the inexperienced consumers. Many creditors use words or terms like 'home equity', 'reserve' and 'home account' in the name of their mortgage products with a view to attract as well as confuse the consumers who possess equity in their homes. Many have been demanding that the government ban such misleading promotional with a view to protect the consumers, but if you scrutinize these advertisements closely, you will find that they are quite apparent and permissible by the law. Nevertheless the fact remains that such promotional items or practices may still deceive the na´ve or irresponsible consumers into purchasing the wrong financial product that does not suit his needs or, worse still, it may be one that may prove to be detrimental to his cause.

At the same time, it is important to mention that many consumers also have misconceptions regarding the financial products as well as companies or associations marketing them. For instance, there are many inexperienced consumers who are of the opinion that the certification of some specific products and services by reputed firms, societies or non-profit organizations spontaneously ensures the protection of the consumers. Although it is definitely a wrong concept, many consumers are of the view that an endorsement by such organizations guarantees that the product, service or the company or organization is the finest that can be obtained anywhere. The consumers even believe that they have a lawful way out with such organizations in case any problem comes up and the company or organization offers an absolute depiction of the entire home equity alternatives obtainable in the mortgage market. In such instances, it is advisable to ask questions and make things clear from the experts who are well aware of the mortgage market.

To Top