Can I Pay Off a Reverse Mortgage Early?
Yes. A reverse mortgage can be repaid before the natural end of the loan. The important issue is what prepayment charge, if any, applies under the specific lender's mortgage terms when you decide to pay it out.
← Back to Reverse Mortgage QuestionsYou Can Repay It — But Check the Prepayment Terms First.
A reverse mortgage is not permanent financing that you are forced to keep. You can repay the mortgage, refinance it or sell the property. The cost of doing so depends on the lender, the mortgage contract and when the payout occurs.
Full Repayment Is Possible
You can generally repay the outstanding reverse mortgage balance before the mortgage would otherwise become due.
A Prepayment Charge May Apply
Paying the mortgage out early may trigger a charge under the lender's prepayment provisions.
Timing Can Affect the Cost
The amount of any prepayment charge can depend on how long the mortgage has been outstanding and the lender's specific rules.
Selling the Home Triggers a Payout
If the property is sold, the reverse mortgage is dealt with from the sale transaction according to the lender's payout terms.
Refinancing Also Requires a Payout
If you replace the reverse mortgage with another mortgage, the existing reverse mortgage must be paid out as part of the refinance.
Get an Official Payout Statement
Before making a decision, request the lender's current payout figure so you know the exact amount required.
The Payout Is More Than the Amount You Originally Borrowed.
The reverse mortgage balance can increase over time as interest is added to the loan. When the mortgage is repaid, the payout figure reflects the amount actually owing at that time.
Depending on the mortgage and circumstances, the payout may also include an applicable prepayment charge and other amounts permitted under the contract.
The unpaid principal forms part of the amount required to discharge the mortgage.
Interest that has been added to the mortgage balance must also be repaid.
An early payout charge may apply depending on the lender, timing and mortgage terms.
Any other applicable amounts permitted under the mortgage agreement will be reflected in the lender's payout statement.
They Are Not Necessarily Treated the Same Way.
A lender may allow certain voluntary payments or prepayments without the same cost that applies when the entire reverse mortgage is discharged. The actual privileges depend on the mortgage contract.
Review the Annual Privilege
Some reverse mortgage products permit a specified amount of voluntary prepayment under the mortgage terms.
Check the Timing Rules
The lender may have specific timing or notice requirements for voluntary payments or a full payout.
Compare the Penalty
If a charge applies, compare the cost of paying out now with the cost of keeping the reverse mortgage longer.
Consider Why You Are Paying It Out
Selling, refinancing or simply wanting to reduce the debt can each lead to a different financial decision.
Consider the Expected Holding Period
If you expect to move or refinance soon, that should be considered before arranging a reverse mortgage in the first place.
Use the Actual Numbers
The right decision should be based on the lender's current payout statement, not an estimate of what you think is owing.
A Reverse Mortgage Can Be Paid Off Early.
You are not permanently locked into a reverse mortgage. But before selling, refinancing or paying it out, confirm the lender's current payout amount and prepayment terms so you understand exactly what the early repayment will cost.
Let's Talk →