Facing foreclosure of your mortgage and possibly being forced from your home is daunting under any circumstances. For some, getting a reverse mortgage could provide the solution that borrowers need to stay in their home and pay off their existing mortgage. There are many factors to consider in determining whether getting a reverse mortgage to stop a f🗹oreclosure will work for your situation. In many cases, it’s not the best option.

Traditional vs. Reverse Mortgages

It’s important to know how a 澳洲幸运5官方开奖结果体彩网:reverse mortgage works before applying for one. With a traditional “forward” mortgage, you borrow money to buy your home. You then repay that money over the loan term—usually 15 to 30 years—in monthly installments. As you make your monthly payments, you pay down the loan balance and increase the amount of equity that you own in the home. 

With a reverse mortgage, you borrow money against your home, meaning your home guarantees the loan. If you fail to pay back the loan, you forfeit your home. You can use the reverse mortgage proceeds to pay off your existing mortgage. Any remaining proceeds are yours to use as needed. Over time, the loan balance on the reverse mortgage increases, and the amount of equity you own decreases. A reverse mortgage is repaid when you no longer live in the home—by selling the home, moving out, or dying.

Using a Reverse Mortgage to Stop Foreclosure

The majority of reverse mortgages are called 澳洲幸运5官方开奖结果体彩网:hom🦂e equity conversion mortgages (HECMs). HECMs are backed by the 澳洲幸运5官方开奖结果体彩网:Fed𒁏eral Housing꧅ Administration (FHA) and issued by an FHA-approved lender. To qualify, you need to be age 62 or older and have enough equity in the home to pay off your existing mortgage loan.

If you qualify for a reverse mortgage and can pay off your existing mortgage to avoid 澳洲幸运5官方开奖结果体彩网:foreclosure, that solves the immediate problem. However, that leads to potential problems in the future. First, you lose some or most of the equity that you have in your home, so you cannot draw on it for future expenses, such as medical bills. 

If you also don't meet the following HECM requirements, your mortgage lender could foreclose on your reverse mortgage:

1. You must pay your 澳洲幸运5官方开奖结果体彩网:property taxes, 澳洲幸运5官方开奖结果体彩网:homeowners insurance, and 澳洲幸运5官方开奖结果体彩网:homeowners association (HOA) fees on time. 
2. You must 澳洲幸运5官方开奖结果体彩网:keep your home well-maintaine꧅d an❀d make repairs as needed. 
3. You must remain in your home 澳洲幸运5官方开奖结果体彩网:for the majority of the year. 
   

In addition, if you die, permanently move out of the home (for example, into an assisted living facility), or sell the property, the reverse mortgage loan is due immediately. 

If you do not have the funds to pay your taxes and insurance or to keep your home properly maintained, you could face foreclosure with a reverse mortgage. 

Another consideration: While receiving payments from a reverse mortgage has no impact on Social Security benefits or Medicare eligibility, the proceeds from this type of loan could impact how much you receive from Medicaid and 澳洲幸运5官方开奖结果体彩网:Supplemental Security Income (SSI).

Medicaid and SSI assistance is based on an individual’s current financial assets and monthly income, and reverse mortgage proceeds could exceed those program limits, meaning you won’t qualify for either. 

Other Options to Avoid Foreclosure

While a reverse mortgage may sound like the perfect solution to a traditional mortgage foreclosure, it’s important to consider all your options before taking that step. Here are other choices:

• Refinance your mortgage: Talk with your 澳洲幸运5官方开奖结果体彩网:mortgage lender to see if you can 澳洲幸运5官方开奖结果体彩网:refinance your existing mortgage with a lower interest rate and/or longer loan term. These options could reduce your monthly payment so that it is more affordable. 
  
• 澳洲幸运5官方开奖结果体彩网:Loan modification: Talk with your mortgage lender to see if you can change the terms of your existing mortgage to afford the monthly payments. This could include reducing your interest rate, extending the loan term, or reducing your 澳洲幸运5官方开奖结果体彩网:principal loan balance. 
  
• Sell your home: If you are unable to refinance your existing mortgage or get a loan modification, 澳洲幸运5官方开奖结果体彩网:you may need to sell your home and move into more affordable housing. 
  
• Reduce your expenses: You may be able to receive assistance from state and local programs to help pay your utilities and fuel expenses. Also, check with your county or city tax office to see if there are ways to reduce how much you pay in property taxes. These savings could provide the extra cash you need to pay your mortgage.
  

Consult With Profe🍌ssionals Before Making a Decision 

Taking out a reverse mortgage should not be an impulse decision. Instead, it’s important to speak with professionals who can provide more information to help you make the best decision for your financial future. 

To qualify for an HECM, you’ll need to speak with a Uni♑ted State Department of Housing and Urban Development (HUD)-approved counselor first. But don’t stop there. If you have a 澳洲幸运5官方开奖结果体彩网:financial planner or an 澳洲幸运5官方开奖结果体彩网:estate planning attorney, speak with them to see how a reverse mortgage will affect your current finances and any financial assets that you plan to leave your heirs. Talking with a consumer protection lawyer is also a good idea to make sure that you know the ins and outs of using a reverse mortgage to prevent foreclosure. 

The Bottom Line 

✤ When you’re faced with foreclosure, a reverse mortgage can sound like the perfect solution. After all, your existing mortgage will be paid for, and you will no longer have to make monthly payments. However, the ramifications of a reverse mortgage can be much more complicated than that, so it’s important to know exactly what you will face before signing that loan application. You may find that there are better options to prevent foreclosure and protect your financial asset♏s.