Homeowners considering a reverse mortgage loan may be concerned of how it may affect their heirs. Likewise, their loved ones may be worried that a reverse mortgage loan sounds too good to be true. However, reverse mortgage loans can be an excellent financial opportunity for senior homeowners who qualify. Reverse mortgage loans allow homeowners age 62 and older to tap into the equity they have built up in their home as another source of income.
The benefits of a reverse mortgage loan are both abundant and personal. Many seniors choose a reverse mortgage loan for peace of mind. Perhaps they need home repairs or modifications to make the home more accessible. Others choose a reverse mortgage loan for the financial safety net. Seniors often do not want to be a financial burden to their family and a reverse mortgage allows them to have another source of income should they need it. Still others decide whether a reverse mortgage is the best option for them, perhaps due to large medical bills they wouldn’t be able to afford otherwise. Families should have a serious conversation about the purpose and requirements of a reverse mortgage loan with a financial advisor.
The following are some of concerns which heirs may have regarding reverse mortgage loans.
Will my parents lose their house?
Borrowers are required to maintain the home and continue paying property taxes, insurance and any home owners’ association fees and live in the home full time. So long as they meet these requirements, the loan will not become due and borrowers will live in the home. The home is in the borrower’s name for the life of the loan.
How much money will my parents receive?
The amount will depend on the type of loan they choose, the age of the youngest borrower, the value of their home and the current interest rates. For specific information, call a reverse mortgage adviser at 800.976.6211.
What happens to the house when my parents pass away?
Heirs have a few options when their parents pass away.
1) The heirs may sell the property to repay the loan. If the proceeds of the sale are more than the loan amount, the heirs keep the excess. If the sale of the home does not pay off the loan, HUD absorbs the extra loan amount, as long as the reverse mortgage loan is a federally-insured loan. Otherwise known as a non-recourse loan.
2) Heirs may keep the home. Heirs will either repay the balance of the loan or refinance and pay 95% of the home’s current value.
3) The heirs choose not to be responsible for the home. If the heirs choose not to have anything to do with the home, they don’t need to do anything and are not responsible for any repayment.
Reverse mortgage loans can be a financial life saver for many seniors struggling to make ends meet, afford expensive health care treatment, or save for emergencies. All borrowers are required to meet with a HUD-approved reverse mortgage counselor prior to closing the loan. During this session, family or close friends are encouraged to attend to speak with the advisor about any concerns they may have. Use our reverse mortgage calculator in the top right of this webpage to see how much you may qualify for.