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REVERSE MORTGAGESFederally insured reverse mortgages, officially issued as part of the Home Equity Conversion Mortgage program, are a way for homeowners 62 and older to borrow money using their home equity as collateral. The proceeds are first used to pay off any remaining balance on the mortgage, freeing homeowners from monthly payments. Interest and monthly insurance premiums are charged throughout the life of the loan, and the total becomes due when the borrower dies (or permanently moves out of the home).
A common misconception about reverse mortgages is that the lender takes an equity share in the house. This is simply not true; it’s a relationship between the lender and the borrower, and it’s the same kind of relationship as a regular loan. Just like a typical mortgage, the lender is the first lien holder on the property title and the loan be repaid when the property changes hands. How the heirs handle repayment depends on how much equity is left in the home and whether they want to keep it. It is important to note that in the event of death or in the event that the home ceases to be the primary residence for more than 12 months, the homeowner’s estate can choose to repay the reverse mortgage or put the home up for sale. If the equity in the home is higher than the balance of the loan, the remaining equity belongs to the estate. If the sale of the home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA. No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from the estate to pay off the reverse mortgage. Please contact the Law Offices of Bernadette M. Crowley at (718) 423-5500 or [email protected] if you are considering pursuing a reverse mortgage. |
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