All reverse mortgages are due and payable when the last surviving borrower dies, sells the home, or permanently moves out of the home. (Typically, a "permanent move" means that neither you nor any other co-borrower has lived in your home for one continuous year.)
Reverse mortgage lenders can also require repayment at any time if you:
• fail to pay your property taxes or special assessments;
• fail to maintain and repair your home; or
• fail to keep your home insured.
These are fairly standard "conditions of default" on any mortgage. On a reverse mortgage, however, lenders generally have the option to pay for these expenses by reducing your loan advances and using the difference to pay these obligations. This is only an option, however, if you have not already used up all your available loan funds.
Other default conditions on most home loans, including reverse mortgages, include:
• your declaration of bankruptcy;
• your donation or abandonment of your home;
• your perpetration of fraud or misrepresentation;
• if a government agency needs your property for public use (for example, to build a highway); or
• if a government agency condemns your property (for example, for health or safety reasons).
Changes that could affect the security of the loan for the lender can also make reverse mortgages payable. For example:
• renting out part or all of your home;
• adding a new owner to your home's title;
• changing your home's zoning classification; or
• taking out new debt against your home.
You must read the loan documents carefully to make certain you understand all the conditions that can cause your loan to become due.
After closing a reverse mortgage, you have three days to reconsider your decision. If for any reason you decide you do not want the loan, you can cancel it. But you must do this within three business days after closing. "Business days" include Saturdays, but not Sundays or legal public holidays.
If you decide to cancel, you must do it in writing, using the form provided by the lender, or by letter, fax, or telegram. It must be hand delivered, mailed, faxed, or filed with a telegraph company before midnight of the third business day. You cannot cancel by telephone or in person. It must be written.
AARP does not endorse any reverse mortgage lender or product.