Some reverse mortgage questions get asked over and over again. In honor of that, answers to some common reverse mortgage questions are below. More questions will be posted at a later date:
Q: Can my heirs still inherit my home?
Yes. In a reverse mortgage, the estate is still passed to the heirs. Often, the heirs choose to sell the home with the proceeds going towards repaying the reverse mortgage. The lien cannot be for more than the home is sold for, so if the home is sold for less than the value of the lien, the lender must make an insurance claim for losses to the FHA. Once the home is sold, the estate owes nothing.
If, however, the heirs wish to keep the home, they can pay back the reverse mortgage through cash or other assets. They can also refinance the reverse mortgage into a conventional forward mortgage.
Q: Can I outlive a reverse mortgage?
No. A reverse mortgage is not due until the death of the borrower or until the borrower sells the home or moves to permanent care. There is no limitation, so if you live in your home for another 50 years, the reverse mortgage will still not become due until your death.
Q: Will my Social Security and Medicare be affected?
While government entitlement programs such as Social Security and Medicare are not affected by a reverse mortgage, need-based programs such as Medicaid may be. The pace of the fund withdrawal must be limited to remain eligible. Talk with your loan officer to make sure your payments for the reverse mortgage do not jeopardize your eligibility.
Q: What are the downsides?
The costs of a reverse mortgage can be high and are higher than the costs of a conventional mortgage. If the proceeds are not withdrawn correctly, a reverse mortgage can hurt one’s ability to qualify for Medicaid and other need based programs. If a person’s home has a high value, they may not be able to get enough money out of their home to make a reverse mortgage make sense. If one spouse is under the age of 62 and taken off the title for the purpose of a reverse mortgage, the reverse mortgage will become due upon the death of the older homeowner, which might prove to be a problem for the spouse. Lastly, for homeowners who want to pass their home on to their children or grandchildren, a reverse mortgage may not be the best idea.
Q: I’m selling my home to the bank, right?
No. The deed and title to the home stay in the borrower’s name. Like with any mortgage, the lender adds a lien to the title for the amount borrowed so they can guarantee it gets paid back.