Table of Contents

• Is a Reverse Mortgage Bad for Heirs? The Short Answer
• What Happens to a Reverse Mortgage When the Borrower Dies
  • Who Notifies the Lender, and When the Loan Comes Due
• Do Heirs Owe the Loan? Non-Recourse Protection Explained
• Can Heirs Keep a House With a Reverse Mortgage?
• Reverse Mortgage Heir Repayment Options Compared
  • A Simple Decision Tree for Heirs
• Reverse Mortgage Foreclosure After Death: What Actually Triggers It
• Costs and Documents Heirs Should Expect
• Your Next Step: Getting Clear Answers Before You Decide
• Frequently Asked Questions

Is a Reverse Mortgage Bad for Heirs? The Short Answer

No, a reverse mortgage is not automatically bad for reverse mortgage heirs. That is the answer we give families at Reverse Mortgage Reality every week, and it surprises most of them.

Here is why. A reverse mortgage is a non-recourse loan (Comment for 1026.33 – Requirements for Reverse Mortgages).

But “not automatically bad” is not the same as “no impact.” The loan does reduce the estate. Interest and fees grow the balance over time.

Below, we walk through what actually happens, who owes what, and the choices heirs have. The good news: with a clear timeline and a little planning, most families handle this without drama.

What Happens to a Reverse Mortgage When the Borrower Dies

The loan becomes due and payable when the last borrower dies or permanently leaves the home. That is the trigger. At that point, the loan matures and the estate or heirs must settle it.

This is where families often get confused. The loan does not vanish, and the house does not automatically become the lender’s. The home stays in the estate until someone pays the loan, sells the property, or signs the home over to the lender.

Who Notifies the Lender, and When the Loan Comes Due

The executor or personal representative usually handles the notification, though any heir can call the servicer. Call the loan servicer as soon as practical after the death. You will need a death certificate and, in most cases, letters testamentary or proof of authority from the probate court.

The servicer will then send a written notice stating the loan is due. From that point, heirs typically get a set window to resolve the loan, either by paying it off, selling the home, or completing a deed in lieu of foreclosure.

If you want the fuller picture of how these loans are structured, our guide on how a HECM reverse mortgage works explains the mechanics from the borrower’s side.

Do Heirs Owe the Loan? Non-Recourse Protection Explained

Heirs are generally not personally liable for a reverse mortgage. The loan is secured by the home, not by the heirs’ personal assets. This is the single most important fact for worried families.

Here is how the protection works in practice:

• If the home sells for more than the loan balance, the difference goes to the heirs or the estate.
• If the home sells for less than the loan balance, the lender can’t pursue the heirs for the shortfall. With a HECM, the FHA reimburses the lender and with a Jumbo Reverse Mortgaeg, the lender actually absorbs the shortfall.
• Heirs are not added to the loan, so their credit is not tied to it.
• The estate still pays normal costs, like property taxes, insurance, and upkeep owed while the home is being settled.

One caveat worth knowing. The non-recourse protection applies to the loan itself. It does not erase debts the borrower owed separately, and it does not cover taxes or contractor liens on the property. Those follow the usual estate rules.

The Consumer Financial Protection Bureau’s guide to reverse mortgages is a plain-language resource worth reading before you talk to any servicer.

Can Heirs Keep a House With a Reverse Mortgage?

Yes, heirs can keep the home. But keeping it means paying off the reverse mortgage, either with cash, a new mortgage, or a refinance.

The math decides this one. Compare the loan payoff amount to the home’s appraised value and to what the heirs can realistically borrow or pay.

• If the home is worth more than the loan, there is equity to work with. A refinance or new mortgage may let an heir buy out the other heirs and keep the property. If the heirs are old enough and there’s sufficient, they can actually get a new reverse mortgage.
• If the home is worth about the same as the loan, keeping it usually means bringing cash to closing. Many families decide that isn’t worth it.
• If the loan is higher than the value, heirs can typically walk away without paying the difference.

A common mistake is assuming you must decide fast, before you have an appraisal. Those two numbers answer most of the question. (Source: Department of Housing and Urban Development’s HECM program information)

FREE Reverse Mortgage Quote →

Reverse Mortgage Heir Repayment Options Compared

Reverse mortgage heirs have four realistic paths, and each fits a different situation. The table below is the quick version we walk families through.

A Simple Decision Tree for Heirs

Work through these questions in order. They match how we would talk it through with our own family.

1. Is the loan balance less than the home’s value? If no, a deed in lieu or a short sale conversation with the servicer is usually the cleanest route.
2. If yes, do any heirs want to keep the home? If no, sell it, pay the loan, and split the remaining proceeds.
3. If yes, can the heir who wants it qualify for a refinance or pay cash? If yes, buy out the other heirs and keep the property.
4. If no, does the estate have time to sell at a fair price? Ask the servicer for a written extension while the estate is active.

Reverse Mortgage Foreclosure After Death: What Actually Triggers It

Foreclosure after death is not automatic, and it is not the lender’s first move. It happens when the loan stays unresolved past the deadline.

The usual triggers are straightforward:

• No one contacts the servicer after the borrower dies
• The estate misses the payoff or sale deadline without asking for an extension
• Property taxes, homeowners insurance, or basic upkeep go unpaid
• The home sits vacant and unattended for a long stretch

Most of these are avoidable with a phone call and a paper trail. Keep records of every conversation with the servicer, send notices in writing, and request extensions early rather than after a deadline passes.

Costs and Documents Heirs Should Expect

Settling a reverse mortgage costs money beyond the loan payoff. The loan balance is only one number on the ledger. Budget for these categories, and know which ones you can control:

Costs tied to the loan and the property

• Appraisal fee to establish the home’s current value. This matters most when heirs want to keep the home or when the loan balance is close to the home’s value.
• Payoff statement fee from the servicer. Ask for the payoff statement in writing and confirm the date it is good through, since interest continues to accrue until the loan is paid.
• Property taxes, homeowners insurance, and utilities until the home is sold or transferred. These are the costs families most often forget, and unpaid taxes or lapsed insurance can trigger problems with the servicer even while the estate is being settled.
• Maintenance and upkeep while the home is vacant or being marketed. A vacant home deteriorates faster, and the servicer may require the property to be maintained.

Costs tied to the estate and the sale

• Attorney and probate costs for the estate. These vary widely by state and by the complexity of the estate.
• Real estate commissions if the home is sold. These are typically negotiable and are paid from the sale proceeds.
• Recording fees for any deed transfer, plus any title search or title insurance costs the buyer or lender requires.
• Closing costs if an heir refinances to keep the home, including lender fees, title work, and any required escrow deposits.

On the paperwork side, gather these early so you are not scrambling against a deadline:

• Death certificate (order several certified copies)
• Will and letters testamentary, or other proof of authority from the probate court
• Payoff statement from the servicer
• Recent property tax and insurance records
• Deed and title documents
• Photo ID and proof of authority for the executor
• A written log of every call and letter to the servicer, with dates and names

For a deeper breakdown of what the reverse mortgage fees look like, see our page on reverse mortgage closing costs explained.

Your Next Step: Getting Clear Answers Before You Decide

The hardest part of this process is not the loan. It is the uncertainty, and the fear that a wrong move costs the family the house.

At Reverse Mortgage Reality, we keep the conversation plain. No pressure, no jargon, no sales pitch. We will walk you through the payoff math, the deadlines, and the options that fit your situation.

If you want to talk through your family’s specifics, request a quote and we’ll get you clear answers.

The real question is not whether a reverse mortgage is bad for heirs. It is whether your family understands the timeline, the non-recourse protection, and the four options in front of them. Get those straight and the decision gets much easier. Get started with Reverse Mortgage Reality and get the plain answers your family deserves.

Add reversemortgagereality.com as a preferred source on Google →

The post Is a Reverse Mortgage Bad for Heirs? What Families Need to Know first appeared on Reverse Mortgage Reality.

Table of Contents

• How Reverse Mortgage Interest Rates Work in 2026
  • The Expected Rate and Why It Matters
• Current Reverse Mortgage Interest Rates: What to Expect
  • A Dated 2026 Rate Snapshot With Methodology
  • The Rate Components, Separated
  • What Moves Rates Up or Down
  • Forecast Uncertainty: What 2026 and 2027 Rates Might Do
• Reverse Mortgage Expected Rate and Your Principal Limit
  • A Worked Example: The Difference Between the Fixed Rate, Variable Rate and Jumbo Reverse Mortgage Options
  • Why Two Neighbors With Identical Homes Get Different Offers
• Reverse Mortgage Fixed vs Adjustable vs Jumbo Rates
  • When a Fixed Rate Makes Sense
  • When an Adjustable Rate May Fit Better
  • When to Consider Jumbo Rates
• Reverse Mortgage Interest and Fees: The Full Cost Picture
  • How Interest Accrues Over Time
• How to Compare Reverse Mortgage Offers in 2026 and 2027
• Frequently Asked Questions

How Reverse Mortgage Interest Rates Work in 2026

Reverse mortgage interest rates in 2026 determine both how much you can borrow and how fast the loan balance grows.

Most borrowers miss that dual role: a lower rate raises your principal limit and slows the growth of what you owe; a higher rate does the opposite.

The Consumer Financial Protection Bureau’s reverse mortgage guide describes the HECM as a Home Equity Conversion Mortgage, insured by the Federal Housing Administration and governed by rules from the U.S. Department of Housing and Urban Development.

One point to clarify before we dive any deeper. Being that this is a reverse mortgage, you don’t have to make monthly principal and interest payments on the funds you receive. Thus the interest adds to the loan balance, and you don’t need to pay it out of pocket while you live in your home.

The Expected Rate and Why It Matters

The expected rate is a projected average rate used to calculate your initial principal limit, not the rate on day one. HUD rules derive it from current lending rates plus a margin, and it is the single largest lever on how much you can access.

Your actual accrual rate can differ from the expected rate, which explains why two neighbors with identical homes can receive different offers.

Current Reverse Mortgage Interest Rates: What to Expect

Most pages that rank for this query dodge the number or publish a rate with no date, lender sample, or program type. Below is a transparent, dated snapshot plus the methodology.

A Dated 2026 Rate Snapshot With Methodology

Snapshot date: October 23, 2026. Rates move daily, so treat this as a reference point, not a quote.

Methodology. The ranges below reflect advertised rates from a sample of HECM lenders on the snapshot date, for a borrower age 62 or older, a single-family primary residence, and a loan within the FHA lending limit.

Two cautions. First, the initial rate on an adjustable HECM is not the rate you will pay for the life of the loan; it can rise within the caps. Second, a low advertised initial rate can pair with a high margin, so the rate climbs faster once the index moves.

The Rate Components, Separated

Competitors blur five different numbers into the word “rate.” They are not the same, and only some affect your principal limit.

• Index. The published benchmark an adjustable HECM tracks. When it rises, your accrual rate rises at the next adjustment.
• Lender margin. The lender’s fixed add-on to the index. It is set at closing and does not change.
• Initial rate. The rate your balance actually accrues at closing. This is the interest that accrues first.

The expected rate drives your principal limit and proceeds. The initial and ongoing rates drive how fast your balance grows. The margin and caps determine how much the ongoing rate can move. A quote showing one number hides at least three of these.

What Moves Rates Up or Down

• The index rate. Adjustable HECM rates follow a published index; which is the 10 Year CMT.
• Lender margin. This stays fixed for the life of the loan. It can not move.
• Rate caps. Adjustable loans carry periodic and lifetime caps that limit how high the rate can climb. There are 5 and 10 point caps. Having helped over 470 seniors get reverse mortgages, I have yet to see a reason for the 10 point interest rate cap. Every HECM that I personally help folks out with has a 5 point cap.

Forecast Uncertainty: What 2026 and 2027 Rates Might Do

No one can promise where rates will be next quarter, and any page presenting a 2026 forecast as a guarantee is selling certainty it doesn’t have. Adjustable HECM rates move with their index(again the 10 Year CMT), so an adjustable borrower accepts index risk for payout flexibility, while a fixed borrower accepts less cash and a narrower payout structure for rate certainty. The honest question is which risk you would rather carry.

Reverse Mortgage Expected Rate and Your Principal Limit

The principal limit is the maximum you can borrow, calculated from three inputs: the youngest borrower’s age, the home’s value or the FHA lending limit, and the expected rate. A higher expected rate produces a lower principal limit factor, shrinking available proceeds.

Here is how those inputs interact:

Your available proceeds are the principal limit minus mandatory obligations: payoff of any existing mortgage, closing costs, the initial mortgage insurance premium, and any set-asides.

A Worked Example: The Difference Between the Fixed Rate, Variable Rate and Jumbo Reverse Mortgage Options

Here is an illustration using round numbers for a borrower age 70 with a home appraised at $600,000 and no existing mortgage. Let’s see how the different programs change the estimated cash out

Please note that this is just an estimate. HECM loan sizes can adjust on a weekly basis. Your state and situation can move these numbers up and down.

Why Two Neighbors With Identical Homes Get Different Offers

Yes, two seniors with the same house and age can have different cash out amounts. The difference maker is the type of reverse mortgage(HECM vs Jumbo) and whether or not we have to pay off a mortgage or not.

FREE Reverse Mortgage Quote →

Reverse Mortgage Fixed vs Adjustable vs Jumbo Rates

Fixed and adjustable rates serve different retirement plans; choosing between them is less about which rate is lower today and more about how you intend to draw the money.

A fixed rate on a HECM stays constant for the life of the loan.

An adjustable rate can change over time within caps. In exchange for that uncertainty, adjustable HECMs generally allow a line of credit, monthly payments, or a combination of payout options.

When a Fixed Rate Makes Sense

A fixed rate fits when you need a defined sum for a defined purpose and will not need to draw more later. If you look at the chart above, oftentimes the fixed rate leaves a substantial amount of cash on the table. If you are paying off a mortgage and taking a specific amount for a medical expense or renovation, but don’t need future cash the fixed rate might make sense.

By the way, the trade-off is real: you cannot go back and convert a lump-sum draw into a line of credit later.

When an Adjustable Rate May Fit Better

An adjustable rate fits when your needs are ongoing rather than one-time. A line of credit lets you draw only what you need, so interest accrues only on the amount actually borrowed.

Adjustable HECMs also support tenure and term payments, which convert equity into a predictable monthly check. If your goal is a line of credit or cash flow rather than a single smaller payout, the adjustable structure is usually the more natural fit.

When to Consider Jumbo Rates

A jumbo reverse mortgage generally gives more cash than either type of HECM. It also doesn’t have the FHA maximum home value of $1,249,125. So if you’re looking for the maximum cash out or have a valuable home, you might consider a jumbo reverse mortgage despite the higher rate.

Reverse Mortgage Interest and Fees: The Full Cost Picture

The rate is only part of what a reverse mortgage costs. Fees and insurance premiums also come out of your equity, charged upfront or added to the balance over time. It’s important to understand that the majority of the fees get added to the loan. The appraisal and counseling are the only typical “up-front” fees. Click this link for a deep dive into the Reverse Mortgage Closing Costs.

The main components are:

• Origination fee. A lender fee, subject to HUD limits that scale with home value.
• HECM Initial and annual mortgage insurance premium. The FHA insurance that protects both borrower and lender.
• Closing costs. Appraisal, title, recording, and related third-party charges.

How Interest Accrues Over Time

Interest on a reverse mortgage compounds. You make no monthly principal and interest payments, so unpaid interest is added to the balance and the next period’s interest is calculated on that larger figure.

The balance grows faster when rates are higher or when you draw a larger lump sum at the start. The equity that remains after the balance is repaid stays with you or your heirs.

How to Compare Reverse Mortgage Offers in 2026 and 2027

Comparing offers means comparing Loan Estimates line by line, not headline rates.

Work through these steps with each lender:

1. Request the Loan Estimate in writing. Ask for it before any counseling session so you have real numbers to discuss.
2. Compare the expected rate and the initial rate separately. Confirm both are disclosed and understand which drives your principal limit.
3. Check the adjustable-rate caps. Ask for the periodic cap, the lifetime cap, and the index and margin in writing.
4. Add up all fees, not just the origination fee. Include mortgage insurance premium and closing costs.
5. Model your actual payout plan. Ask each lender to project the loan balance at five, ten, and fifteen years for the payout option you intend to use. This will be on your amortization schedule.
6. Confirm the payoffs. If an existing mortgage is involved, verify exactly what was deducted.
7. Complete HUD-approved counseling. Counseling is a program requirement, and a good counselor will review your estimates with you.

The HUD-approved housing counseling agencies are the right place to confirm program requirements and check that a lender’s figures align with current rules. For independent guidance on how reverse mortgages affect retirement income, the Federal Trade Commission’s consumer information on reverse mortgages is a useful plain-language reference.

Finally, make sure you understand the pros and cons of each program. Whether its me or another reverse mortgage lender, have them answer every single one of your questions. Ask for their experience and previous client testimonials.

Comparing reverse mortgage offers without a clear framework is how borrowers end up paying for a structure that does not fit their retirement.

Add reversemortgagereality.com as a preferred source on Google →

The post Reverse Mortgage Interest Rates 2026: What Borrowers Pay first appeared on Reverse Mortgage Reality.

Did you know there are more reverse mortgages in Philadelphia, PA than anywhere else in the country? Reverse Mortgage Reality is the #1 Trusted Reverse Mortgage provider from Philly to Bucks County, Chester County, Montgomery County, Delaware County, Berks County and all across the state of Pennsylvania.

Since 2008 we’ve helped over 431 seniors learn about and get reverse mortgages.

Here are the types of folks we help…

• Seniors looking for reverse mortgage information for themselves
• Family members who are looking for potential help for loved ones
• Trusted advisors like attorneys, CPAs, financial advisors and home health agencies

EDUCATION FIRST

At Reverse Mortgage Reality, we have an Education First model. Here’s how it works…

• First, we TEACH you about how reverse mortgages in Pennsylvania work.
• Next, we LEARN about your situation. Together, we figure out if a reverse mortgage is an appropriate solution that will help you.
• Finally, IF a reverse mortgage is the right option for you, we’ll walk you through the process, hand in hand.

WHAT TO DO NEXT

No matter where you are in the information gathering process, we’ll be glad to help. Please call locally (267) 289 1095 or click below for a detailed proposal.

CLICK HERE FOR A FREE REVERSE MORTGAGE ANALYSIS

Now, while we’re here, let’s learn a little bit more about what reverse mortgages are and how reverse mortgages work.

WHAT IS A REVERSE MORTGAGE?

A reverse mortgage is a program that’s only available for seniors who are 62+ who own their home and want to stay there. It allows you to take PART of your home’s value, in tax free cash, without requiring monthly payments.

If you’re wondering why you don’t get the ENTIRE value of your home, its because you aren’t selling it to the reverse mortgage company. You are still the full owner. We just get paid back when you(or both you AND your spouse) pass away or sell your home. More on that later….

When you get a reverse mortgage, first, we pay off anything that’s owed on your home. This means a first or second mortgage, a HELOC, any sort of loan, taxes or judgments.

Next, if you qualify for extra money, you can take it up front in 2 lump sums, you can take it in monthly income(just like an annuity), or you can leave it in a line of credit that actually grows tax free over the years.

If you’d like a reverse mortgage calculator…click below and we’ll show you how much cash you can get and your options.

CLICK HERE FOR A FREE REVERSE MORTGAGE QUOTE

Here are your options in Philadelphia reverse mortgage options. Reverses are broken into 3 types, the federally insured reverse mortgage(HECM), a JUMBO reverse mortgage and the reverse mortgage for purchase. Below we’ll go over each option…

✅ HECM

This stands for Home Equity Conversion Mortgage. This is the most common type of reverse on the market today. It covers the above characteristics under “What is a reverse mortgage?”

A HECM is insured by the FHA and covered by “MIP”, which is a sort of federal insurance. It protects your heirs in case the market drops(think 2008).

In addition, HECMs cover homes up to a maximum value of $970,800. Yes, we can do HECMs for pricier homes, but there might be better options.

✅ JUMBO REVERSE MORTGAGE

A jumbo is for homes who have higher values than $970,800. Being outside of the FHA, high value home owners can get more cash from a jumbo.

For example, a senior who’s home is worth $1,300,000 would be able to get FAR MORE CASH from a JUMBO Philadelphia reverse mortgage than a traditional HECM.

✅ REVERSE MORTGAGE FOR PURCHASE

A reverse mortgage(or HECM) for purchase is a unique tool that allows seniors to “rightsize” to their forever home and remain financially stable. With a HECM for purchase, a senior will invest approximately 45-75% into their home with the reverse covering the rest. The senior will have no mortgage payments to pay for the rest of his or her life.

Here’s an example of how a reverse mortgage for purchase works. Frank is 68 and moved from New Jersey to Philadelphia to be closer to his grandkids.

Frank found a wonderful home in a 55+ Community that he purchased for $403,000. Because of his age, Frank invested just $216,000 into the home, and the reverse mortgage covered the remainder. And of course, Frank has no mortgage payments. He just has to stay current on his property taxes, homeowner insurance and HOA dues.

Frank couldn’t be any happier with his reverse mortgage…he’s got money in the bank AND he doesn’t have any monthly payments.

HOW REVERSE MORTGAGES HELP SENIORS

You just briefly read about how Frank used a reverse mortgage to purchase his forever home close to his grandkids. How else can a senior use a reverse mortgage in Philadelphia, PA?

✅ Eliminate Your Existing Mortgage/Bills and Save Cashflow

✅ Pay for Home Health Care to Age In Place

✅ Buy Your “Forever Home”…Just Like Frank

✅ Get Annuity Style Income(but without the taxes)

✅ Create a Line of Credit that Grows Over the Years(again tax free growth)

✅ Fund a Business

✅ Take Care of Family Members

✅ Aid In “Grey Divorce”

✅ Self-fund Long Term Care(by either buying a policy OR setting your own line of credit)

✅ Create Another Bucket of Money to Draw From

✅ Stop Drawing Down Retirement Accounts(and save the taxes too)

✅ Etc Etc Etc

The bottom line is, if you’re looking information, have a question or want a quote we’d be glad to help. We help folks all over Pennsylvania(and the country), but our hearts are in Philadelphia. Reverse Mortgage is a wonderful program for senior citizens, and we’d be more than happy to walk you through the process…together. For contact information…

CALL US AT (267) 289 1095 OR

CLICK HERE FOR A FREE REVERSE MORTGAGE QUOTE

The post Philadelphia Reverse Mortgage – Reverse Mortgage in Philadelphia, PA first appeared on Reverse Mortgage Reality.

This question shouldn’t have been shocking. After all, the name of the program is “reverse mortgage”, so conceivably it IS reasonable to think that to “reverse” a mortgage, you need to HAVE a mortgage.

Fortunately, the answer to the question is YES, and here’s a quick video showing how it works(if you’d like to just read instead of watching the video…feel free to follow below).

JERRY’S STORY

First, let’s talk about Jerry. Jerry is a client and a good friend of mine. He was introduced to me by his financial advisor, who recommended a reverse mortgage credit line(more on the WHY later). Jerry just came to me when he was 58; 4 years before he turned 62(CLICK HERE to see how old you have to be to get a reverse mortgage).

This guy is a planner.

Anyway, Jerry has a home in Philadelphia that’s worth about $240,000. He’s a retired Pharmaceutical salesman, and doesn’t have a mortgage. On top of that, Jerry’s got a good bit of money in his retirement funds.

So why would Jerry get a reverse mortgage?

Jerry is a young guy(his wife is 62 as well), and he leads a fun life. He’s got a condo down the Jersey Shore. He likes to enjoy his life. And he retired early.

But(and this is important)…the majority of his money is in QUALIFIED FUNDS.

***Sidenote-Qualified funds basically means money that’s taxable when you take it. So if you grab $20,000 for a new roof, the REAL bill is closer to $25,000. In other words, Uncle Sam’s got his hand in the “Qualified Fund Cookie Jar”.

So every time Jerry takes a dollar, the good ol’ government gets a quarter.

Jerry’s financial advisor, and Jerry himself were both worried that at the rate he’s going, he might run out of money later down the road. When it comes to retirement, nobody has a crystal ball. The costs of home healthcare have crippled many a millionaire’s savings accounts.

Because of this, Jerry’s advisor told him to reach out to me way back when he was 58. He was pretty sure that Jerry could get a reverse mortgage even if he didn’t have a mortgage, but they had to put the plan together. So we planned, and then we waited.

JERRY’S REVERSE MORTGAGE SOLUTION

In the end, Jerry got $115,000 to put into his reverse mortgage line of credit. Just like a regular HELOC, no interest is charged unless money is taken, but besides that the reverse mortgage credit line has a couple of unique features.

✅ First, when a senior DOES access his or her money, he or she has no mortgage payments(I’m pretty sure you already know that though).

✅ Next, when a senior DOESN’T take his money, the reverse mortgage credit line grows over time. Here’s how it works…

Jerry’s original line of credit of $115,000 will increase at about $6,000 a year in the beginning. Then, as the growth starts to compound, the annual appreciation will hit $7,000, then $8,000 then $10,000. Simply put, every year the un-used portion of Jerry’s line of credit grows.

✅ This leads us to the 3rd unique feature of the reverse mortgage line of credit. All of the growth is TAX-FREE(at this point I should state that I am not giving tax advice, nor am I licensed to do so. But this information comes from over 400 reverse mortgages done).

How can all this growth from Jerry’s LOC be tax free? Well, simply put, its because Jerry is borrowing money. One day the money that JERRY TOOK will need to be paid back(when he passes away or sells the home). This mechanism is very similar to cash value life insurance.

DOROTHY’S STORY

Dorothy is different than Jerry. She’s an 87 year old widow, who lives out in the suburbs. Dorothy is a lovely lady(to learn more about Dorothy CLICK HERE) who just needed a little help.

Dorothy is free and clear also, and her home is worth a little bit over $400,000. But Dorothy is just bringing in social security, and has ran through a good portion of her investments. Her property taxes are through the roof, and speaking of roofs…

Three months ago, Dorothy was forced to write a large check to pay for a new roof?

So, despite NOT having a mortgage, Dorothy needed help. And the best way to help her was to give Dorothy a reverse mortgage!

In the end, Dorothy was able to take a large percentage of her home’s value in tax free cash to add to her bank account. With that money(and the 2nd year reverse mortgage credit line funds) Dorothy will live in her home for the remainder of her life.

We also have Carol’s story, but go ahead and watch the video to learn more about Carol.

Now, whether you have a mortgage or you don’t, if you need information about reverse mortgages I’d personally be glad to help. You can reach me at jasone@reversemortgagereality.com or (267) 289 1095. Feel free to give me a shout and I’ll do my best to help!

The post Can I Get a Reverse Mortgage If I Don’t Have a Mortgage? first appeared on Reverse Mortgage Reality.

Dorothy and her husband did everything right for years. They raised wonderful children, took care of themselves, and over time paid their mortgage down to 0. When Mr. D passed, Dorothy had to “re-boot” and tweak her habits. Suddenly, the FAMILY fixed income was down to just Dorothy’s fixed income(which wasn’t a ton to write home about).

Behind Dorothy’s fixed income were some investments. Just like a good number of seniors, Dorothy and Mr. D had saved over the years, and now she had a nice little nest egg? to live off.

But one year turned into 5 years, which turned into 15 years. Time flew by for Dorothy as it does for all of us.

In those years, Dorothy kept picking at her investments. She needed to pay taxes(the property taxes in Dorothy’s neck of the woods are OUT OF CONTROL), she had to maintain the property, and she had grandbabies to treat?

Then, she needed a new roof. After paying for the roof, Dorothy was concerned. She reviewed her finances with her attorney, Rosemarie, who just happens to be a financial whiz?‍?

Rosemarie was worried that Dorothy was in real danger of her money running out while she was still alive, so she recommended that Dorothy look into a reverse mortgage. Rosemarie’s goal was to fortify Dorothy’s bank account; she wanted Dorothy to have enough money so that she wouldn’t have any more financial worries…no matter how long she lived.

Dorothy had heard all sorts of negative talk about reverse mortgages, so she brought a financially astute friend in for our first meeting. Some of the questions they both had(and my answers) were…

❓ How can I get my money?

✅ While you can get your money up front in a lump sum, monthly in annuity style payments, or in a credit line, Dorothy chose to take a partial lump sum to replenish her bank account. Then, she left another portion in a reverse mortgage line of credit that actually grows tax free over the years.

❓ Does the bank own my home, or do I keep it?

✅ This is a question that many folks have. Dorothy stays on the deed and the reverse mortgage is just a lien on title(just like any old mortgage). She has full control of the home.

❓ Can my kids get my home when I pass?

✅ Another great question! When Dorothy passes, her home will be passed down to her heirs. They’ll get the house, and they can either sell it, refinance it, or pay it off in cash. Dorothy’s kids don’t want the house though, so they’ll sell it, the reverse mortgage company will get paid back, and Dorothy’s kids will get the left over money.

❓ If I get a reverse mortgage, is there any way I can lose my home?

✅ Yes there is. Dorothy needs to keep up on her property taxes and homeowners insurance, and if her (new) roof blows off the home, she needs to replace it. With that said, Dorothy IS a responsible homeowner, and has consistently paid her taxes on time. And there are no reverse mortgage police who will ever check on the home’s condition(after the initial appraisal of course).

❓ How much money can I get?

✅ I’m not going to share exactly how much money Dorothy received, but we qualify folks based on their age and the value of their home. A senior of Dorothy’s age gets between 60-70% of her home’s value. The rest of the equity stays in her home.

❓ So why is there so much negativity about reverse mortgages?

✅ Well, up until about 5 years ago, reverse mortgages weren’t really safe for some people. Anybody who was 62 or older and had equity in their home could get one. There were no other qualifying requirements. Problems came in when irresponsible people(or folks who couldn’t afford to keep up on their bills) took reverse mortgages and didn’t pay their property taxes.

Since May of 2015, reverse mortgages have changed for the better. We make sure that seniors have a history of on time payments AND that they can afford their senior living expenses. If they can’t we may be able to hold a LESA(lifetime expectancy set aside) where we pay their property taxes and homeowners insurance for the rest of their life expectancy. If that doesn’t work, we’ll turn the loan down.

Below is a video interview that I did with Dorothy. It’s pretty casual and short. But check it out and let me know what you think. Of course, if you’d like more information feel free to reach us at jasone@reversemortgagereality.com or (267) 289 1095.

The post Dorothy’s Reverse Mortgage Review first appeared on Reverse Mortgage Reality.

WHY DOES DAVE RAMSEY HATE REVERSE MORTGAGES?

About a year or so back, Dave Ramsey put out a nasty video on YouTube about reverse mortgages. In his opening monologue, he couldn’t see why a 92 year old lady who needed a little bit of cash to live comfortably would take a reverse mortgage.

Uncle Dave argued that she should take a 15 year mortgage(you know, the kind where she’d have to make mortgage payments until she was 107). For those who aren’t that financially literate, he failed to point out that the monthly mortgage payment of a 15 year mortgage is higher than a 30 year mortgage(or a reverse mortgage…but that one’s obvious), and that very few seniors on fixed income are likely to be able to afford it.

The fact that a  person with a pretty prominent following would say something like that is irresponsible, dangerous, and deserves an educated response.

As usual, my main response is in a video…so if you like these sorts of things, click below to watch.

Now that you’re done watching, let’s pow wow for a bit. Dave Ramsey is seen as a financial guru to many people. He hates reverse mortgages(his words, not mine), but he has other “unique” ideas about money as well.

IS IT A 3% RULE OR AN 8% RULE?

The most striking view of his that I disagree with the most(besides his reverse mortgage babble) is that retirees should withdraw 8% of their retirement portfolio each year. Remember, many financial experts dictate that one can “safely” take no more than 3% annually.

Why just 3%(it actually used to be 4%)? Here’s the deal, as of 2019 the stock market has been humming. Which obviously is great for all of us stock owners.

But remember what happened in 2008? If you don’t, here’s a quick refresher. In 2008 many stocks imploded, and the market actually lost a little over 50%. Now, if you’re still working, you’re feeling the pain, but you’ve got time to recoup that money.

But if you’re retired and on a fixed income its a different story. When a market drops 50%(or even just 20 or 30 percent), it is very difficult for it to recover to its original point. Even in a very aggressive “Bull” market it will still take years. And seniors just don’t have that time to wait for recovery.

Now, let’s talk about an example. Sarah is in her 80’s and depending on her investments to live. She listened to Dave Ramsey, who told her she should be taking 8% out of her retirement accounts each year. Now, common sense(or is it MATH) dictates that drawing money out of an investment that’s already dropping will cause that investment to run out of money quickly. At a 4% annual withdrawal its scary. 8% is SUICIDE.

Not to mention that because she’s in her 80’s, Sarah won’t have enough time for the money to build back, even if the economy does incredibly well.

Now in Uncle Dave’s mind, your retirement accounts should average a 12% performance over the years. But what about seniors who experience a “Bear” market like 2008? At that point, drawing your accounts down at 8% a year, again is suicide.

This is just one example that hopefully sets the table for Dave’s wisdom on a product that he obviously doesn’t understand; the reverse mortgage.

Dave’s argument with reverses goes as follows…

✔ People with reverse mortgages have lost their homes due to tax foreclosures, so they must be unsafe.

✔ Reverse mortgages have interest rates higher than the average 15 year fixed rate, so they must be rip offs.

Let’s tackle both of these issues.

First, it is true that folks with reverse mortgages have lost their homes to tax foreclosure. In fact, before the reverse mortgage rules changed in 2015, there were quite a few reverse mortgage tax foreclosures.

HOW SENIORS HAVE LOST THEIR HOMES IN A REVERSE MORTGAGE

Back before May of 2015, if you had a pulse and equity in your home you could get a reverse mortgage. Lots of times seniors used reverses as “bailouts”, to get them out of a mortgage that they were behind on. Because the industry didn’t check income, they couldn’t verify if a senior could afford to stay in their home AFTER they got a reverse mortgage.

Now, as responsible homeowners, we all realize that we’ve got to pay our property taxes, or eventually the Tax Man will Cometh. But some seniors either couldn’t afford their property taxes, or decided not to pay them. Either way, because the taxes were delinquent the senior eventually lost their house.

THE MORAL OF THE STORY IS PAY YOUR PROPERTY TAXES AND YOU WON’T EVER LOSE YOUR HOME

But then came May of 2015. Fortunately, the experts at HUD and the FHA enacted a financial assessment, which led to only seniors who could actually afford to stay in their home long term being able to get a reverse mortgage.

Here’s how it works. If you have a pattern of lateness on your bills, or you don’t have enough income to afford all of your bills, the reverse mortgage must set up an escrow account for your property taxes and homeowners insurance for the remainder of your lifetime expectancy. By the way this is called a LESA(lifetime expectancy set aside).

If the loan isn’t big enough to fund the LESA, then you won’t qualify. Again, we don’t want to loan money to people who aren’t financially able to stay in their homes long term. It just doesn’t make sense.

This LESA went a LONG way to ensure that reverse mortgages weren’t temporary band aids. These are supposed to be loans that will keep you in your home for the rest of your life, with financial security.

RIGHT NOW TODAY’S NEW REVERSE MORTGAGE IS SAFER THAN EVER

It’s just unfortunate that “experts” like Dave Ramsey(and yes Suze Orman too) don’t recognize this reality.

Now, let’s look at Uncle Dave’s next issue with reverses.

Dave Ramsey states that because reverse mortgage interest rates are slightly higher than regular mortgage rates, that they are a rip-off.

He’s right that the rates are higher. But, when you have an 83 year old senior who needs to get rid of her mortgage payment so she can afford to live in her home(where she REALLY WANTS to live), how does any other mortgage(even one with lower rates) make sense?

A slightly higher interest rate does not impact our senior at all, because she doesn’t need to pay it on a month to month basis(or ever). I will step in and say the she DOES NEED to keep her property taxes and homeowners insurance current(as you probably know).

DOES IT MAKE ANY SENSE FOR A SENIOR ON FIXED INCOME TO GET A 15 YEAR MORTGAGE WITH A HIGH MONTHLY PAYMENT?

Yes, its also true that a senior’s heirs will get less out of the home than if the senior didn’t get a reverse mortgage. But, did you know that with a reverse mortgage the kids will get your home when you pass away?

And what’s more important, living in YOUR home(that you paid for with your own money) comfortably or struggling so you can give your children a few dollars?

Now, I’m the last guy to say that reverse mortgages are for everybody. They aren’t.

If you’re looking for a quick fix, this isn’t a good loan for you.

If you won’t be able to afford your regular expenses even with a reverse mortgage, you need to seriously consider downsizing.

On the other hand, if you own your home and have some equity that you’d like to use, its worth investigating. Be objective. Look at the pros and cons.

And then if you qualify(by the way, not everybody qualifies for a reverse mortgage), we’d be glad to show you EXACTLY how it would work for you and your financial situation.

To get in touch, feel free to email us at jasone@reversemortgagreality.com or call (267) 289 1095.

The post Why Does Dave Ramsey Hate Reverse Mortgages? first appeared on Reverse Mortgage Reality.

Since the dawn of (reverse mortgage) time, reverse mortgage companies have always checked folks’ credit.

While previously we were just looking to find bankruptcies and judgments, since 2015 its gotten a little bit trickier.

Here’s a quick, under 2 minute video on whether your credit score matters when getting a reverse mortgage. If you can’t see if or if you’d just prefer to read, follow below where I’ll give you a full description.

Welcome back. Now if you watched the above video, you are now a reverse mortgage credit score expert!

If you didn’t watch it(or prefer just to read)…here’s the information you’re looking for.

BUT FIRST, IF YOU NEED IMMEDIATE HELP, YOU CAN ALWAYS CALL US DIRECT AT (267) 289 1095 OR EMAIL jasone@reversemortgagereality.com

First, we can help folks with credit scores in the 400’s and we can help folks with credit in the 800’s. As an example, today I took an application from a wonderful lady who’s middle credit score is 808.

MY MAIN POINT IS THAT CREDIT SCORE DOES NOT MATTER. AT ALL. 

What DOES MATTER is credit characteristics.

First, if you’re on time on your mortgage and bills the reverse mortgage process will be very simple and straightforward. You’re financially responsible and we don’t need to vet you any harder than normal.

When we see someone who is habitually late on their bills, we may structure the reverse mortgage a little bit different than what you see on the TV commercials. By the way, “habitually late” means either you’ve been late on your mortgage, bills or property taxes more than once or twice.

BY THE WAY, IF YOU’VE BEEN LATE DUE TO UNFORESEEN CIRCUMSTANCES, YOU’LL BE OK. 

I recently helped a wonderful widow who had been current on her mortgage her entire life, until 9 months ago. Then, Rosie missed her mortgage and credit card payments for 3 months. Naturally, being on fixed income, crawling out of that hole is darn near impossible. She needed help, and she needed it yesterday.

When we looked into her situation, she told me that she had a heart attack and was in a medically induced coma for 3 weeks. Then when she came to, she was so overwhelmed by her situation that it took her over a month to stabilize. She had no husband or close family to help. When she finally was released from the hospital she realized the awful situation that she was in.

Here’s the point to this story. Even though she was behind on her bills, it was due to her heart attack and hospitalization. She was not(and never had been) financially irresponsible. We were able to prove that this was an unforeseen circumstance by providing medical bills, and our underwriters cleared the reverse mortgage to go forward.

By the way, now Rosie is loving life. She’s living comfortably and most importantly, she’s healthy again?

BUT WHAT IF ROSIE JUST MISSED HER MORTGAGE PAYMENTS WITHOUT AN EXCUSE?

We can still help the “Rosie’s” out there, but the process is slightly different. The best way to explain this is through an example.

I’m currently helping an 89 year old gentleman who is unfortunately in foreclosure. His son took a mortgage against dad’s home and refused to pay it…thus the real danger of losing his home.

If you’d like to know my personal thoughts on this…we’ll just leave it at “some people are UNBELIEVABLE?”

Anyway, because dad is in a foreclosure and thus has been late on his mortgage, we aren’t just paying off his mortgage off. Our reverse mortgage is also setting up an escrow account(called a Lifetime Expectancy Set Aside or LESA) to pay his property taxes and homeowners insurance for the rest of dad’s life.

By the way, to read EXACTLY how this works, read the article here. Just so you know, the article talks about foreclosure, but the same “mechanism” is followed any time there is a Lifetime Expectancy Set Aside.

SO THE BOTTOM LINE FOR DAD IS THAT HIS HOME WILL BE SAVED AND HE’LL NEVER HAVE TO PAY TAXES OR INSURANCE AGAIN. NOR WILL HE EVER WORRY ABOUT LOSING HIS HOME. 

Dad is through the roof and his family members couldn’t be happier?

Now lets summarize what we just learned.

First, in a reverse mortgage, credit score in itself DOES NOT MATTER.

Next, credit characteristics DO MATTER.

If there’s been a late or two in the past…NO BIG DEAL.

HOWEVER, if there’s been a patter of lateness, we’ll require a lifetime expectancy set aside or LESA. This is just a fancy way of saying that we’ll pay your property taxes and homeowners insurance for the rest of your life.

This is the reason why we check folks’ credit. We need to make sure they can afford their bills. Even with a reverse mortgage, property charges get expensive. There are some people who are so far behind that getting a reverse mortgage won’t even help them. Then they need to downsize.

Furthermore, we check seniors’ income as well. Any income source is ok, whether its social security, a pension or full/part time employment. In fact, we can also look at assets(which are 401k’s, investment accounts, savings accounts etc) and qualify them as “potential” income. The vocabulary term for this is “dissipation”.

All we need to do is ensure that you have enough money coming in to pay for your property taxes, homeowners insurance(and other homeowners charges) and expenses on your credit report. We’ll also make sure you’ve got enough for your senior living expenses like groceries, utilities and health insurance.

Again, we just want to make sure that you will truly be able to thrive in your home when you have a reverse mortgage.

With that said, the vast majority of seniors can be helped by reverse mortgages…as long as they want to stay in their home for the rest of their lives AND as long as they can afford it.

I HOPE THIS ANSWERED YOUR QUESTION. IF YOU HAVE MORE QUESTIONS, OR IF YOU’D LIKE MORE INFORMATION, FEEL FREE TO CALL US AT (267) 289 1095 OR EMAIL jasone@reversemortgagereality.com. 

The post Reverse Mortgage FAQ Does My Credit Score Matter When I Get a Reverse Mortgage first appeared on Reverse Mortgage Reality.

As of May 3, 2019, Livewell Financial stopped funding all of their loans(reverse mortgages and regular mortgages too). This means that any loan in their pipeline will not be worked on at all.

Naturally, this is is extremely frustrating.

First of all don’t panic(yes, I know this is easier said that done). No matter where you are in the reverse mortgage process, you’ll be ok.

Just so you know, this has happened before in the reverse mortgage world, and it will probably happen again. In 2009, one of the largest reverse mortgage companies(at the time) Senior Lending Network shut its doors. I(Jason Eichmiller) spearheaded the team to save SLN’s seniors. We worked tirelessly to help every single senior who had a reverse with SLN.

It worked by the way. We helped 96% of Senior Lending Network’s seniors close their reverse mortgages within 3 weeks.

Fast forward to today. If your appraisal has already been completed and you’re in underwriting(or just waiting to close) here’s what will happen. Livewell WON’T close your loan. If you ask us, we’ll help you transfer your appraisal and underwrite your reverse mortgage yourself. This is a quick, easy solution that should take no more than 2-3 weeks from initiation to closing.

If you haven’t had your appraisal done yet, we’ll still be able to help. We will seemlessly order your appraisal, and your reverse mortgage will be closed within weeks.

I understand that this is scary, and I understand your frustration. With that said, we will do our very best to help you get your reverse mortgage closed quickly and painlessly.

For Instant Consideration Call Our Hotline At (267) 289 1095. 

You May Also Email Us At JasonE@ReverseMortgageReality.com

The post What If You Have a Reverse Mortgages With Livewell Financial(just shut their doors) first appeared on Reverse Mortgage Reality.

Some folks think it’s 60, others think its whenever you get social security, or medicare…but really, what’s the answer? In this episode of Reverse Mortgage FAQ, we tell you exactly how old you must be to get a reverse mortgage(and give you the different options if you or your spouse are underage).

Did you watch it? Great! Then you know that the minimum age for the primary homeowner in a reverse mortgage is 62. Now, if you’re 62 and have a 50 year old spouse…that will work. You can still get a reverse mortgage and your spouse will be protected when you pass away.

If you haven’t heard of this rule, its because its fairly new. AARP and the reverse mortgage industry came together in 2014 and made reverse mortgages safe for underage spouses.

If you’re thinking, well, this must mean that before 2014 reverses weren’t safe for underage spouses…well you are right. Here’s what would happen(remember this was back before 2014…its completely different now).

ROBERT AND HELEN’S REVERSE MORTGAGE OPTIONS BEFORE 2014 AND NOW

Let’s say Robert is 65 and his wife Helen is 59. Robert and Helen have a $450,000 home with a mortgage of $180,000. Robert and Helen also have credit cards, and a pretty expensive lifestyle.

Their lifestyle was so expensive, that they were draining $800 out of their retirement accounts every month just to stay afloat.

Robert’s wealth manager was concerned that Robert and Helen would run out of money in their late 70’s at this rate, and introduced them to the concept of a reverse mortgage. The reverse mortgage is designed to pay off the mortgage and credit cards, and in Robert and Helen’s case, they would no longer need to draw down their investment accounts(and they’d save the taxes that they were spending on their draw downs).

THE REVERSE MORTGAGE MADE ROBERT AND HELEN FINANCIALLY STABLE FOR THE REST OF THEIR LIVES

Although Helen was underage, back before 2014 Robert could still get a reverse mortgage without Helen on it. All is well and good, BUT IF ROBERT PASSES AWAY, the reverse would become “due” and Helen would need to pay it off. She could pay it back by selling the property,  refinancing(possibly into a new reverse mortgage) or paying with cash or life insurance.

Back before 2014, I only recommended reverse mortgages in that situation IF the “Roberts” of the world had enough life insurance to make sure that Helen could pay off the reverse and stay in her home.

By the way, if you’ve ever heard a reverse mortgage “horror story”, this is one of them. Thank God AARP and the reverse mortgage industry came together to change the program in 2014.

HOW REVERSE MORTGAGES ARE NOW SAFE FOR UNDERAGE SPOUSES

If Helen and Robert approach me today, the end of the story changes drastically. They’d still get the same benefit of paying off their mortgage and credit cards, but now Helen’s classification is an “eligible non-borrowing spouse”. As long as she keeps the home she shares with Robert as her PRIMARY RESIDENCE, Helen will be fine if Robert passes away early.

Here’s how this works. Let’s say Robert dies at age 70(and Helen is now 64). Because Helen is an eligible non-borrowing spouse, she’ll be able to live in the home for the rest of her life. She’ll just have to keep the house as her primary residence and pay all of her property charges.

Of course, if she decides that she doesn’t want to live there anymore she can sell the home and get the remaining equity once the reverse mortgage is paid off.

With that said, most surviving spouses just want to live comfortably in their own home because of all of the wonderful memories.

WHAT IF THE SPOUSES DON’T LIVE TOGETHER?

One question that possibly just came up in your mind is, “What if the underage spouse doesn’t live with the spouse who is over 62?” This comes up quite a bit when we have separated spouses. In this case, the underage spouse would be considered a “non-eligible non-borrowing spouse” and wouldn’t be eligible for protections once their “of age” spouse passes away.

If you’re in a non-eligbile nbs situation, make sure to speak with your family members and legal advisors so you have a succession plan in place. You don’t want to “wing it” in case of the God forbids.

A REVERSE MORTGAGE FOR 60 YEAR OLDS?

Finally, there is one reverse mortgage program one the market that will allow a primary homeowner as young as 60 get a reverse mortgage. However, this program isn’t offered in every state, and your home must be worth at least $300,000 to qualify. If you are just 60 and you think a reverse might be an option, feel free to reach out and we’ll let you know if this is an option.

Now you have an idea of exactly what age you need to be to get a reverse mortgage, whether you have a spouse or not. If you have any questions about this reverse mortgage faq, or anything else in regards to reverse mortgages feel free to reach out to me at (267) 289 1095 or jasone@reversemortgagereality.com.

The post Reverse Mortgage FAQ: How Old Do You Have To Be To Get A Reverse Mortgage? first appeared on Reverse Mortgage Reality.

If you’re considering a reverse mortgage and you have children, the question of “With a reverse mortgage, will my kids get my home or will the bank take it?” has got to have entered your mind. Easier than writing; I recorded a short video with the answer to that question. Please take a look at it below and of course let me know if you have any questions or need more information.

So, now that you’ve watched the video(or if you weren’t able to), you know that when you get a reverse mortgage, you still have full ownership of your home. When you do pass away your kids will get your home.

THIS SOUNDS TOO GOOD TO BE TRUE…HOW DOES IT WORK?

Did I just read your mind? So how does a reverse mortgage work where we give you money, you don’t make any mortgage payments AND you stay on the deed? And how do the kids get the home?

To answer these common questions let’s look at Nancy’s situation.

Nancy is a 73 year old widow. She has 3 kids who she paid through college, and her family is her life. But Nancy is also on fixed income and has a mortgage. She didn’t save much when she was younger, and besides about 3 years of savings and investments, Nancy really doesn’t have much besides her home.

NANCY ISN’T IN AWFUL FINANCIAL SHAPE RIGHT NOW, BUT IN THE BACK OF HER MIND SHE KNOWS SHE’S ONE EMERGENCY AWAY FROM DISASTER. 

Nancy has 8 grandchildren, and because of that she knows that her son and two daughters aren’t in a financial position to start paying for her mortgage. They’ve got their own families and expenses. Nancy just refuses to be a burden on her loved ones.

Nancy ended up getting a reverse mortgage, which completely eliminated her financial burden. First, it paid off her mortgage. Now, instead of paying the mortgage company on the 15th of each month, Nancy pays herself(by adding the mortgage payment to her savings account). Next, Nancy got $87,000 of tax free money to put into savings.

The combination of saving her mortgage payment and her “upgraded” savings account means that Nancy will be financially comfortable for the rest of her life.

Before we could close the reverse mortgage Nancy needed to be put at ease. And one of her biggest questions in the beginning was…

DOES THE BANK TAKE MY HOME OR CAN THE KIDS GET IT?

Here’s what I told Nancy(and then her FHA counselor reaffirmed it).

First, a reverse mortgage is just a loan like any other mortgage. It is NOT free money and must be paid back at some time in the future(and it will be paid back when you die or when you sell your home). The vocabulary term for this is it is a “secured loan”.

THE HOME STAYS IN YOUR NAME

When you look at your deed after you’ve got a reverse mortgage, you will see that it is still “vested” in your name. You will see a “lien”(ie mortgage) to the reverse mortgage company. Again, this just secures the debt, so the mortgage will automatically be paid back if you sell the home or transfer the deed(ie give it to the kids).

HOW DOES REVERSE MORTGAGE INTEREST WORK?

Because this is a mortgage after all(and therefore not free), there is interest that is charged on the money that you take. Interest rates differ based on financial markets(and what year it is), but in May of 2019 reverse mortgage rates sit at about 5%.

EVEN THOUGH THERE’S INTEREST YOU DON’T HAVE TO MAKE MONTHLY PAYMENTS

Here’s how this works. Let’s say you get $100,000, which pays off your mortgage a gives you a little bit of cash(by the way I’m using $100,000 because its a nice easy number to understand). You aren’t making monthly payments on the $100,000, so at the end of the first year you owe $105,000(because the 5% interest rate “accrues”). And at the end of the second year you owe about $110,000 for the exact same reason.

Of course you don’t have to worry about paying this back while you’re alive, EVEN IF 2008 happens and your house goes under water(which is pretty darn unlikely in my opinion).

BUT WHAT ABOUT MY HEIRS?

Nancy was worried about her kids. She was OK with them getting less out of her home, and her kids wanted her to use her home’s equity to make her life easier. MOST adult children feel the same way. Nancy’s childrens’ biggest concerns were to ensure that she can’t lose the home, and that the reverse mortgage was safe and secure for her. Once her kids fully understood how the program worked…they were all in.

But I still had to explain to Nancy how her kids would get the money. So we went over this example.

Let’s say that when someone passes away, their home is worth $400,000 and $250,000 is owed on the reverse mortgage. If this is you, your heirs would choose whether they want to keep the home or sell it.

YES THE HOME BELONGS TO THE HEIRS

Once they’ve made their decision, if the heirs want to keep the house, they just pay the reverse mortgage($250,000) off. They can pay it off however they want, but some common ways are through a refinance, inheritance cash or through their parents’ life insurance policy.

If the heirs DON’T want the home then they can just sell it. After all, they probably have their own home and family. Moving into YOUR home would be quite a disruption…right? Assuming they sell the home for $400,000 and $250,000 gets paid back to the reverse mortgage company, the heirs would pocket $150,000.

As far as timelines go, the heirs have 6 months to sell the home, and then they can petition HUD for up to two 3-month extensions.

My biggest goal for this article was to make clear not just the FACT that your heirs get your home, but I wanted to show exactly what your heirs’ options are. I hope I’ve made this clear.

If you have any other questions about how this works…feel free to reach out directly at (267) 289 1095 or  jasone@reversemortgagereality.com.

The post Reverse Mortgage FAQ: Will My Kids Get My Home When I Pass Away? first appeared on Reverse Mortgage Reality.