As everyone knows, reverse mortgages operate by essentially buying equity in your home and paying it back to you using one of a variety of payout options. One of the key stipulations that comes along with this deal is that you must keep the estate as your primary place of residence. If, however, you are not living in the house for a period that is 12 months or longer, you will generally also terminate the contract and stop receiving payments. What, then, if nature intervenes and makes this impossible? What if the house is damaged or destroyed and the equity drops?
When Disaster Strikes
Like it was mentioned earlier in this article, you have a 12 month grace period where you can be living in a different residence. This is particularly useful in the event of a natural disaster. If you are partaking in a reverse mortgage, you should be planning on living in your current house indefinitely. This 12 month grace period gives you time to take a step back and rebuild or repay your house if you need to.
It is important that you realize that reverse mortgage broker agencies are composed of people too. There is no case where it is a bad idea to plead with the agencies to try and work something out; often brokers will give a twelve month extension for you to get back up and running. Sometimes, in more extreme cases, even longer extensions may be granted. Extra time is never out of the question.
Your greatest ally in the case of a natural disaster or other event out of your control is to be as upfront as possible with reverse mortgage broker agency. There is a twofold effect that this will have in the future: you will promote a healthy relationship that may result in extra time in case of such an emergency, and you will instantaneously resume your agreement upon moving back into your house.
What if you cannot make the timeframe? If you explain all extenuating circumstances to the agency and they do not give you an extension but you are still unable to make it back in time, your loans will become due and payable. This means that you must repay your loans, the same as if you were to pass away.
The only difference is that if you have debt from your reverse mortgage plan and you die, the debt will not be passed on to your heirs. If you are still alive and your loans are due and payable because of a lack of residence, then you are legally required to pay them back. This can be incredibly problematic if you are forced out of your home as you are most likely in financial difficulty to begin with.
This is exactly why you need to maintain home insurance throughout a reverse mortgage; if you run into an unforeseeable disaster, you cannot afford to be out of money from both your house and your reverse mortgage. Be smart and stay protected.