Paying Down A Reverse Mortgage

There are several options available for paying down a reverse mortgage.  Of course, the reverse mortgage must be paid off in full whenever home is no longer the borrower’s primary residence.  Failure to stay current on taxes and insurance can also result in the borrower being required to pay off the reverse mortgage.

There is another often overlooked payment option.  Take for example borrowers, James and Cathy, who have had the reverse mortgage for a couple of years or so and has been doing fine with their current finances.  For the last few years they knew that they would be receiving a small inheritance.  Well, the time has come and after settling the estate they receive $50,000.  Both James and Cathy are at the age where they are not comfortable with investing their recently received funds.  They know that the return from their savings account is barely returning them one and a half percent and they would like to get some return on the $50,000.  They know that they will have, as most older folks do, some future expenses that may be a little larger than they can handle with their present income.  So, after doing some research, they found out that they could pay down the reverse mortgage and in doing so accomplish two financial goals.  Although they still had a few thousand dollars left on their line of credit with the current reverse mortgage, it would not be enough to cover even a major auto repair bill.  By paying down the reverse mortgage by $50,000 they will lower the current loan balance and increase their line of credit by $50,000.  This increased line of credit can be used as needed.  Note that the $50,000 added to the line of credit will grow at almost 4%.

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