Can lender demand payment

Question

I want to refinance my mortgage of several years, but now I have retired. Now that I am no longer earning W-2 income can my lender demand payment?  I doubt it, but it's a good idea to ask since I will be contacting them to refi.  Also, can I refinance with just my rental portfolio as income and my substantial holdings in my 401K?  Thanks

Dmitriy Fomichenko · Answer

@Mark Forest

Yes, the lender can demand payments and you are obligated to make those payments, regardless of your personal situation. If you don't - your lender will proceed with foreclosure and you will lose your property.

Nick C. · Answer

Am I reading this wrong? Are you asking if you are no longer responsible for making your mortgage payment because you retired?
If that’s the question your personal situation is irrelevant and you still need to pay your mortgage. Especially if you’re looking to refinance.

Mark S. · Answer

I think he’s asking about whether or not they can demand full payment and accelerate the loan, almost like a due on sale clause, because his W-2 income is gone. I think that might be what’s stopping him from going to the lender for a refi.  My strong guess would be no,they can’t call the loan and that yes, they can likely do a refi using both rental income and if nothing else maybe an asset based loan (using your 401(k), etc.) but double check your loan documents and speak to a qualified loan officer.

David Frol · Answer

Mark, give it a try :-). Miss one payment and you will get a demand letter from your lender, late payment will be reported on your credit report and like Dmitri said they will eventually foreclose on you

Will Sifert · Answer

You were given your loan based upon your financial situation (DTI, credit score, income etc.) at that time. I am not aware of any loan that will have an acceleration clause based on you retiring or your salary income going away. However, there could be an acceleration clause if you file bankruptcy.  Other situations that could cause an acceleration clause would be to  miss payment(s), transfer ownership of the property (due on sale clause), cancel homeowners insurance or not keep the house in livable conditions. Take a look at your mortgage docs and all of the reasons for an acceleration should be listed.

I am not an expert with mortgages, but when you go to refi they are going to look at your current financial situation to make sure you meet the criteria for a new loan.

Mark Forest · Answer

Hello, I guess I phrased my question wrong.  I will certainly be making my monthly payments.  I wanted to know if my lender would demand full payment of the mortgage balance since I am no longer working my W-2 job as I was when I got this mortgage. When I contact my lender to refi I will have to tell them I am retired.  I assume I am safe, but I've never been retired before.

Also, how hard will it be to get a refinance since I am retired.  I want to take advantage of the lower interest rates. Sorry for the confusion.

Michael Glist · Answer

Can they? I don't think so but that would depend on the terms you agreed to when you took out the loan.

The likelihood of that though is very slim. Even if that were the case and you did agree to that uncommon term of them being able to call your loan due upon employment change or unemployment which I have not heard of, I doubt that if you have good payment history with them and are on time that they would call your loan due.

That though would be a better discussion to have with your lender or another qualified licensed lender.

As far as refinancing that will depend on what your new income looks like. Yes you can use your retirement and rental income to qualify for a mortgage. But the question now becomes is that income enough to qualify you for the mortgage within their DTI (Debt To Income) ratios based on your new income.

Dmitriy Fomichenko · Answer

@Mark Forest thanks for clarifying... I think the proper term for this is "loan payoff" or "payment in full". No, as long as you continue to make payments lender will not demand loan payoff.

Mark Forest · Answer

I have a substantial amount of funds in my 401, but I don't use that.  I just take occasional drawings from my rentals for my personal expenses.

Can lender demand payment

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