When do you pay back a reverse mortgage? Plus, best lenders to consider

One unique feature of a reverse mortgage is that you don't have to make monthly payments.

But that doesn't mean that the bill won't come due — and when it does, it's due in full. Payment is due whenever you stop living in your house full-time, for whatever reason, including selling your house, moving in with a relative, staying in a long-term care facility for a certain period of time or death.

Here's what you need to know about how and when you have to repay a reverse mortgage, the downsides, benefits and lenders to consider.

A reverse mortgage is a type of home equity loan that allows people over age 55 — or age 62, depending on the product — to tap into their home equity for cash, without a monthly repayment plan. 

Instead, not a single cent on the loan is due until you stop living in the house full-time or fail to keep up with insurance, taxes and maintenance payments. Then, the entire sum, plus any interest, is due in full. 

While it may seem ideal to have all that cash without the extra monthly expense, this repayment structure makes reverse mortgages a riskier product than other types of home equity financing. That's because you often don't know exactly when you'll have to pay the loan back and it's typically out of your control. 

As soon as any qualifying events occur, you'll have to make the full payment immediately. In some cases, this means homeowners or their family will have to put the home up for sale to finance the repayment or risk foreclosure.  

There is a huge plus to the reverse mortgage repayment structure, though. Because borrowers don't have to make monthly payments, reverse mortgages don't require applicants to have a minimum credit score or income to take out the loan, unlike other types of home equity-backed financing. People who take out a reverse mortgage typically use it for supplementing income, making home repairs, or funding in-home healthcare.

Ultimately, you should discuss the details of the reverse mortgage structure with a certified counselor and any heirs before you begin the process. 

Pros and cons of reverse mortgage repayment structure 

Reverse mortgage lenders

If you do decide to go with a reverse mortgage, consider these three options. At CNBC Select, we like that each of these lenders has a solid customer service record, several key types of reverse mortgages and easy-to-use websites. 

Mutual of Omaha 

Types of loans offered: Home equity conversion mortgage (HECM), jumbo reverse mortgage, reverse second mortgage and reverse mortgage refinancing

Availability: All states but New York and West Virginia

If you're looking to take out a loan and prefer to meet with an officer in person, consider Mutual of Omaha. Unlike many big reverse mortgage lenders, this one has dozens of branches across the country. Plus, it doesn't charge fees on HECMs, which can be $35 a month. 

Finance of America 

Types of loans offered: Home equity conversion mortgage (HECM), jumbo reverse mortgage, reverse second mortgage and reverse mortgage refinancing

Availability: Nationwide

Finance of America is dedicated to reverse mortgage lending. We also like that it is available nationwide and that you won't have to pay insurance premiums with its jumbo reverse mortgage product. 

Guild reverse mortgage

Types of loans offered: Home equity conversion mortgage (HECM), jumbo reverse mortgage, reverse second mortgage and reverse mortgage refinancing

Availability: All states but New York 

If you're looking for a lender with a history of excellent customer service, consider  Guild. It has an A+ rating from the Better Business Bureau and it's among the top-ranking lenders on J.D. Power's mortgage customer satisfaction surveys.

It also has a full suite of mortgage products and other home equity financing options as well, so you can compare, contrast, and see what works best for you. 

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every mortgage review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of home loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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