Over the years, when helping borrowers choose the right mortgage loan for their needs, one question is invariably asked: “Can we pay the loan off early?” As necessary as these loans may be, many of us dream of being – someday – mortgage free. The answer, of course, is that a Reverse Mortgage may be paid off at any time without penalty. So, if you win the lottery, inherit a pile of money or find a black bag of cash in the back seat of the taxi, feel free to pay off or pay down your Reverse Mortgage – without any pre-payment penalty.
Although one of the great features of the Reverse Mortgage is that no monthly payments to the lender are required, some borrowers are making repayments to their lender. Paying back the interest that would normally accrue does two things: first, it keeps the mortgage balance from increasing; and second, it allows the borrower to deduct the interest paid to the lender on his or her tax return for that calendar year.
Another variation being utilized by some borrowers, in addition to pre-paying interest, is to also pay back funds that have been withdrawn from their Credit Line so they are no longer charged interest on those funds. In this way, the available balance in their Credit Line remains intact and will again benefit from the Growth Factor. Obviously, these repayment concepts are not for everyone, but it’s sure nice to know we have the option. Don’t be too surprised if lenders begin to include various repayment options in their monthly statements which the borrower may use if he/she chooses to make payments.
Fear not, for most of us, the option of not making monthly payments on our HECM Reverse Mortgage will remain intact.
The Reverse Mortgage Gazette 