Reverse Mortgage Shortfall

A shortfall means that the proceeds available from the reverse mortgage are not enough to fully pay off the homeowner's existing debts - they are "short".

For example:

If a 72-year-old homeowner is eligible for $200,000 but their mortgage balance is $210,000, they have a shortfall of $10,000.

Shortfalls are not insurmountable if the homeowner wishes to proceed with the reverse mortgage. The homeowner has the option of making up the difference by "bringing funds to close." In other words, the homeowner in the example could put in $10,000 and be able to take out the reverse mortgage.

Homeowners who have a shortfall that is only a small percentage of their property's value, often choose to bring funds to close. However, if the shortfall is large, a reverse mortgage may not be possible. In this situation, the homeowner has four options:

1. Wait until they are older (so they can access a higher percentage of the property's value)
2. Wait for the property to appreciate
3. Wait for balance of the mortgage to decrease by continuing to make monthly payments
4. Try to negotiate a "short-pay" with the lender of the existing mortgage