What happens if you outlive your loan?
Based on HECM data
to date, you must seriously consider the possibility that
you will sell and
move sooner than
you now expect.
The odds are that you WILL outlive your loan -
so you need to be thinking about what will
happen when your loan ends.
A 2007 HUD report discovered that HECM borrowers were paying back their loans within
6 to 7 years - way earlier than anyone had predicted, and only about half the average borrower's remaining life expectancy.
No one knows why HECM borrowers are terminating their loans so soon. But the fact
that they do so strongly suggests that the likelihood of your being alive when your loan ends is much greater than you might expect.
So you need to take a hard look at what your financial situation would be if your loan were
to end sooner than you expect.
We would all like to live in our homes for as
long as possible. But during our 70s in particular the likelihood increases that some event might cause us to sell and move.
For example, declining health, disability, or the death of a spouse. Or you might decide to move closer to family, to a better climate, or to a place where someone else would be responsible for household chores and maintenance.
It is also possible that you may only fully understand the reality of a reverse mortgage's costs, rising debt, and your declining equity
when you see the actual numbers on your monthly statements.
But no matter what might cause you to sell
and move sooner than expected, you must
plan for that possibility.
Your HECM counselor can show you what
your projected financial position (amount
owed, amount of equity remaining) would
be at various future times.
So take a close look at those numbers and
ask yourself how you would cope financially
if the loan were to end sooner than you expect,
or for reasons you might not expect.
And keep in mind that that the less of your
equity you spend now via a reverse mortgage,
the more you are likely to have in the future
when you may need it more.