Title and Reverse Mortgages: What You Need to Know

When you take a reverse mortgage, or any mortgage, the loan is secured by the home. The lender will put a lien on your title for the amount of the loan. However, you retain ownership of your home and your name stays on title. Here’s some more information about how title and reverse mortgages work.

What Is a Title?

?In short, a title is a legal document used to prove ownership of a property or asset. In the case of real estate, like a home, the title indicates who has a legal interest in the property. The title can be held in various ways, like sole ownership, joint tenancy with the right of survivorship, tenancy in common, tenancy in entirety, or trust. The way the title is held impacts what happens to the property in the case of a divorce, death, or sale of the home.?

Sometimes a title will note a lien on the property. A lien is a legal claim or right to the home that allows the holder to access the property if a debt is not paid. For example, the government could place a lien on the property for unpaid taxes, or a contractor could do the same for an outstanding debt on a remodeling project on the home. Any mortgage, including a reverse mortgage, will impose a title lien. Liens on the property can only be released if the homeowner pays the debt. In those cases, the holder will provide a release of lien which indicates a clear title. ?

Title and Reverse Mortgages?

Title and reverse mortgages work similarly to any other mortgage. To?be eligible for a reverse mortgage, the borrower must have at least 50% equity in the home. As part of the reverse mortgage application process, the lender will likely conduct a title search on the house to determine if there are any existing federal liens on the property that might make the borrower ineligible. If this is the case, the borrowers would have to pay off those liens to take a reverse mortgage. Often, but not always, existing liens can be paid off with reverse mortgage proceeds.??

What Happens to a Title in a Reverse Mortgage??

When a borrower takes a reverse mortgage, the title and property remain in their name, but with a notation that the lender has a lien on the home. The title will change only if the lender forecloses on the home or the borrower decides to sell the home, divorces, or dies.?At this point, a new title will be issued with the new owner’s name.??

Retirement Magazine is published by Finance of America. The views expressed in this publication are those of the author alone and do not necessarily reflect the views and opinions of Finance of America Companies. This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.

These materials are not from HUD or FHA and were not approved by HUD or a government agency. Not all products and options are available in all states. This article is intended for general informational and educational purposes only and is subject to change without notice and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional. When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. The lender may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan). The balance of the loan grows over time and the lender charges interest on the balance. Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, HOA Fees (when applicable) and related taxes (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise, the loan becomes due and payable. The loan also becomes due and payable, and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid. This is not a commitment to lend or extend credit. Security National Mortgage Company NMLS#3116. Security National Mortgage Company home office address 433 Ascension Way, 5th Floor, Salt Lake City, UT 84123. Equal Housing Lender