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Can you rent out a house that has a reverse mortgage?

By J. Spinali on 01.27.2019


If you move from the property and rent the home, you have violated the mortgage terms, and the lender will call the Note Due and Payable as soon as they become aware of the default of the loan terms.  Suppose you do not repay the obligation after being notified by the lender. In that case, the lender will begin a foreclosure action because the default affects your property ownership and possibly your credit. 

Suppose there was a delinquent balance because of the foreclosure. In that case, if HUD had to pay any claim because of a loss, you would be ineligible for other government-insured lending programs for as long as the delinquent balance remained outstanding. 

If you feel that you can no longer live in the home, you are far better off selling the property than risking the default on the loan terms.  HUD has seen a steady increase in losses, and lenders are looking at ways to crack down on borrowers who default on their loans. 

As soon as none of the original reverse mortgage borrowers live in the home as their primary residence, the loan becomes due and payable. There is an assignment of rent in the Deed of Trust (as with every mortgage security instrument) that allows the lender to collect all the rents on the property if they determine and notify you that you have breached the terms of the loan as would be the case if the property is being rented.  

That bottom line: 

Reverse mortgages are intended for owner-occupied homes only.  That is perfectly acceptable if you are still living in the property and renting out rooms.  This is only true if the house is no longer occupied by at least one of the original reverse mortgage borrowers.

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