Reverse mortgages can be complicated.
As as senior, you needed money.
You did not qualify for a home equity line of credit or a reverse mortgage.
You turned to a reverse mortgage to satisfy this need.
According to a recent nj.com article titled “Can we undo a reverse mortgage to keep the home?,” many people take out reverse mortgages without fully understanding them.
How do reverse mortgages work?
To take out a reverse mortgage an individual must be age 62 or older.
Reverse mortgages allow such eligible individuals to qualify for traditional home equity line of credit without a monthly loan payment.
A problem could arise as the loan balance increases rather than decreases over time.
This is because there are no required principal or interest payments.
Why is this significant?
If the borrow with the reverse mortgage dies or moves, the loan balance will come due to the bank.
This means the home belongs to the bank if the loan balance is greater than the value of the home.
What can be done if the value of the home is more than the reverse mortgage loan?
If this is the case, then an heir or the homeowner can sell the home and pay off the loan using the proceeds.
The outstanding loan does not need to grow.
If a homeowner so chooses, he or she can pay down reverse mortgage debt.
Doing so can free up available money for later borrowing.
Before taking out a reverse mortgages be sure you understand the specifics of the loan.
Any action taken with your home will necessarily impact your estate plan.
Discuss your options with an experienced estate planning attorney before signing a reverse mortgage loan.
Reference: nj.com (December 13, 2019) “Can we undo a reverse mortgage to keep the home?”