Can a reverse mortgage pay off my existing mortgage?
Yes, and for many Utah homeowners that is the main reason to consider one. Existing mortgage liens must be paid off at closing, and reverse mortgage proceeds are normally used to do exactly that. The result is the removal of the required monthly principal-and-interest payment. Anything left over can be taken as a line of credit, monthly payments, a lump sum, or a combination.
Yes, and for many Utah homeowners that is the main reason to consider one. Existing mortgage liens must be paid off at closing, and reverse mortgage proceeds are normally used to do exactly that. The result is the removal of the required monthly principal-and-interest payment. Anything left over can be taken as a line of credit, monthly payments, a lump sum, or a combination.
Detailed answer
A HECM must be in first lien position, so any existing mortgage or home equity loan is paid off at closing as a mandatory obligation. For a homeowner with a modest remaining balance and significant equity, this is usually the whole point. Consider a $650,000 home in Orem with $125,000 left on the mortgage. The HECM pays off that $125,000, and the required monthly principal-and-interest payment disappears from the household budget permanently. Whatever principal limit remains after the payoff and closing costs is available in the payout structure the borrower chooses. Two cautions apply. First, if the existing balance is large relative to the home value, the available proceeds may not cover it, and the borrower would need to bring cash to close — which often signals the loan is the wrong fit. Second, property taxes, homeowners insurance, HOA dues, and maintenance continue. Removing the principal-and-interest payment is not the same as removing the cost of owning a home.
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