Reverse Mortgage Term

The term of a reverse mortgage is indefinite. The loan comes due when the borrower no longer needs the home as a residence. In most cases, this is when the borrower dies, chooses to move or enters a health care facility on more than a temporary basis.

The loan is fully repaid when the borrower sells the home. The lender may take the home, which is pledged as collateral, to satisfy the debt but may not take any other assets, no matter how large the loan balance becomes.

A borrower cannot be foreclosed upon for missing a payment, as there are no payments, Harris says. However, it is possible to default on a reverse mortgage contract. A default could precipitate the sale of the home. This could occur if the borrower commits fraud, by providing false information to get the loan, for example.

Other reasons for defaults include failing to keep the home in good repair, failing to pay taxes assessed against the home, failing to insure the home or creating a lien with higher priority than the reverse mortgage. Failing to pay a repairman who then creates a vendor's lien is an example of the last circumstance.

In any of these instances, the loan becomes due immediately. The homeowner has the option to repay the balance of the loan or let the lender sell the home to satisfy the debt.

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