Infomarine On-Line Maritime News - I’m 69 with a $250K reverse mortgage hanging over my head — should I use up most of my nest egg to pay it off?

However, if you continue living in your home until you pass away, your heirs will inherit the house — and the reverse mortgage.

The loan would have to be paid in full, if they decide to keep the home. If they instead decide to sell, “they must repay the full loan balance, or at least 95 percent of its appraised value if the loan balance owed is more than the home value,” according to the Consumer Financial Protection Agency.

Typically, they would have 30 days to repay the loan after receiving a notice from the lender (or turn over the home to the lender), although it’s possible to get an extension if they’re actively trying to purchase or sell the home.

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Options for paying off a reverse mortgage early

Maybe Samantha wants the peace of mind of owning her home, or maybe she wants to leave the house to her children without burdening them with debt. Whatever the reason, she does have a few options.

One of those options is to do nothing. She could choose to remain in her home, with enough money coming in from Social Security and her retirement savings to enjoy a comfortable retirement.

When she passes away, her children could sell it and use the proceeds to pay off the reverse mortgage. It’s a trade-off: Samantha lives more comfortably and leaves less to her children, or she lives a more spartan lifestyle to leave more to her children.

If Samantha does decide to pay the loan off early, she could consider refinancing (turning a reverse mortgage into a regular mortgage), though that may not make sense in a high interest rate environment.

She could also consider paying it all off in one lump sum, making a partial payment (such as paying off $50,000 to $100,000 now while preserving some of her savings) or making loan payments to reduce her interest over time. Or, she could keep the reverse mortgage and invest that money conservatively as part of her long-term retirement plan.

Even if Samantha can live off her Social Security and savings, she’ll still be responsible for paying property tax, insurance and maintenance on her home. Plus, she may not want to drain her savings in case she needs that money for an emergency or future medical care.

If you’re considering paying off a reverse mortgage early, it’s a good idea to sit down with a qualified financial advisor to model various scenarios based on your Social Security income, retirement savings, withdrawal rate and taxes — and how different scenarios would play out if you paid it off (either in a lump sum or with smaller payments over time).

This could help you make an educated decision based on calculations instead of emotion.