Check back soon
Once posts are published, you’ll see them here.
Although there are no limitations as to how a person may use the proceeds from a reverse mortgage, most borrowers fall into one of these three scenarios:
1. Typically paying off an existing mortgage, eliminating that monthly payment and accessing additional equity for retirement needs.
2. Using a reverse mortgage to purchase a home. Buying “up” or stretching precious retirement liquidity while securing housing without a mortgage payment.
3. Using Reverse as part of an overall retirement strategy to improve one’s financial security.
The concerns most have:
- Family Concerns. Loved ones want to be equally informed.
What happens to the estate/family home after parents pass away?
Does anyone inherit debt owed?
Can parents lose title to the home during their lifetime?
- Address horror stories of seniors losing their home. You should have all of your fearful questions answered. Here a some, but not all you may have:
How can my parents lose title? When they no longer occupy. The loan service company checks residency once a year. It needs to be certified that they still live there at least 6 months out of the year. Or if the home goes into default on taxes, insurance, home owner's association or significant deferred maintenance.
The reverse mortgage does need to be repaid when the last surviving borrower on the loan passes away, moves from the home permanently, or does not occupy the home for longer than 12 months.
When the bank sales the home, the remaining equity, if any, remains with you in the estate. The estate is given a check for the difference. And what if there is a negative difference - or the bank loses money? Reverses are non-recourse loans so that means the loss is written off with no penalty to the estate or decendents.
- What is the catch? How does the lender and HUD make money from this?
The lender charges interest and Housing and Urban Development, who insures the lender, charges mortgage insurance. What has been borrowed and the interest are deferred and added to what is ultimately owed from the estate once the loan is due and payable.
What if the home is worth more than what is owed? Then the estate will have an appraisal that will determine it's value. Value exceeding what is owed is owed to the estate. If the home is worth less than what is owed, then that portion is written off. It's non-recourse so no one owes the bank or HUD. The bank will be compensated by HUD from the mortgage insurance fund.
What if the estate or the decendents want to keep the home and it is worth less than what is owed? HUD will sell the home to bonafide decendents at 95% of the appraised value of the home. And so the money that is still owed is written off. That is what the insurance fund is for.
These concerns, and any others you might have, need to be explained to your satisfaction. Here is a link to the Consumer Financial Protection Bureau's consumer advisory on reverse mortgages.
