Reverse Mortgage Pitfalls For Heirs
by Pat from Redlands, California, USA
Ask Kate about reverse mortgage pitfalls For heirs: Hi Kate, I am told to obtain a reverse mortgage, my home needs little to no equity. My concern is the debt that my heirs will incur. What is the worst case scenario? Are my heirs personally responsible for paying off the financing?
Kate Answers: Reverse Mortgage Pitfalls For Heirs
***zz-portrait-left.shtml*** Dear Pat,
Just think about reverse mortgages... Income instead of monthly house payments! Freedom!
Even so, it's not unusual for homeowners and heirs alike to wonder what happens to the debt.
Specifically, what are the reverse mortgage pitfalls for heirs?
"If the value of the real estate drops below what is owed, will heirs eventually be personally liable for the debt?"
Heirs of homes financed with a reverse mortgage are not personally responsible for paying off the loan unless they wish to retain the house.
Three Options for Heirs of Homes with Reverse Mortgage Financing
- Refinance and pay off the existing reverse mortgage.
- Retain the house and pay off the debt, in which case, the entire mortgage would need to be paid.
- Sell the house to pay off the reverse mortgage. The estate is not responsible for the unpaid balance of the reverse mortgage if the home sells for less than what is owed.
In other words, heirs do not lose a car or have to dip into their savings to pay for remaining reverse mortgage debt should they choose to sell the home.
Here's more good news. What happens to the equity if the home is financed for less than its value? All remaining equity will be inherited by the estate, that's what!
I hope this is reassuring, Pat. I'm also attaching a summary of other pages on my website with further reverse mortgage information for Seniors and their families. ***zzz-link-reverse-mortgage.shtml***
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