Reverse Mortgages: Understanding the Acceleration Clause

Using a reverse mortgage can be a great way to supplement your income during retirement. If you are thinking about getting a reverse mortgage, you need to understand how the acceleration clause and how it can impact you. Here are the basics of the acceleration clause when it applies to a reverse mortgage.

Reverse Mortgage

A reverse mortgage provides you with monthly payments from your lender, in return for the equity in your home. You have to be at least 62 years old to gain access to this loan program. You are not required to make any monthly payments. Instead, the payments are made to you. The loan will be repaid when you sell the property or when you die.

Acceleration Clause

Reverse mortgages have acceleration clauses tied to them. An acceleration clause means that the lender can require the loan to be repaid immediately. The clause is going to come into effect when the borrower sells the property or when they die. At that point, the proceeds from the sale of the house, or the life insurance policy will have to pay for the remaining balance on the reverse mortgage. Many lenders also have an acceleration that is tied to fraud as well.

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