January 08, 2019
At the time, a reverse mortgage seemed the perfect way to fund your financial goals. But perhaps circumstances have shifted or you’ve changed your mind. It’s not too late to back up (and out) before or after you sign your reverse mortgage paperwork.
Here’s how to get out of a reverse mortgage in three common scenarios.
There’s a time and a place to trust your gut’s nagging doubts. This is one of them. There are two important questions you should consider (or reconsider).
**Is a reverse mortgage really the best fit for your financial needs? **
Pinpoint why you’re making this decision in the first place and research other ways to overcome your financial challenge. For example, if paying off debt is your motivation, look into low-interest personal loans and home equity loans.
**Can you keep up with your home’s upkeep? **
Letting home maintenance slide is not an option once you’ve signed up for a reverse mortgage. Although reverse mortgages don’t require monthly payments, this loan does require homeowners to meet other requirements, such as paying property taxes and insurance and keeping up with maintenance. Forgoing these expenses could result in a foreclosure.
Nothing is final with a “cooling-off” period clause. Otherwise known as the right of rescission, this exit option gives homeowners three business days after signing the paperwork to reconsider without penalty. Make sure you didn’t inadvertently waive this right to speed up the paperwork in the first place.
To opt out, put pen to paper. Your lender must receive your decision in writing within the permitted three days. Once the cancel is set in motion, your lender must terminate the loan and return fees, closing costs, and any unused funds within 20 days.
After all is said and done, you still have options to exit a reverse mortgage.
The most expedient course of action is to repay the balance in full. The good news is reverse mortgages don’t typically have prepayment penalties. The not-so-good news is if you pay the loan back ASAP, you miss out on having that extra cash on hand.
**How do you know if you can even repay the loan? **
There are at least three reliable ways to extricate you from this situation.
Homeowners have the right and resources to change their minds. Exercise yours if that reverse mortgage—or lender—seems too good to be true. No matter what stage you’re at, there are options to exit a bad deal and turn that remorse right around. Home equity sharing can be a smart alternative to a reverse mortgage.
*Hometap Note: The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.
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