Reverse Mortgages and Your Estate
America’s seniors have worked long and hard through many decades to save for retirement and build equity in their homes. It’s only natural to be concerned about passing the fruits of that labor on to family members. Often times seniors, family members or heirs have questions about how a reverse mortgage may impact the estate.
Does my home still belong to me (and my estate)?
Absolutely. Just like a “regular” mortgage, your home remains titled in your name. You own it. That means it can be part of your estate, just like most other assets. Also just like a regular mortgage, a reverse mortgage balance must be settled with the lender along with your estate.
Can my family keep the home?
Yes. Your heirs have several options to choose from, and keeping the home is certainly one of them:
- Your heirs can refinance the property, settle the reverse mortgage, and keep the family home.
- Your heirs can sell the property, settle the reverse mortgage, and keep any remaining proceeds from the sale
- If your heirs wish, they can simply sign the deed over to the lender to settle the mortgage balance.
Can my heirs ever owe more than my home is worth?
No. While it’s possible for a reverse mortgage balance to grow to exceed your home’s value, your heirs are protected. In the event they wish to keep or sell the property, the most they can ever owe is the lesser of the current reverse mortgage balance or 95% of the home’s fair market value. If the loan balance exceeds that amount, FHA Insurance kicks in to make up any difference to the lender.
My home is in a trust. Can I still get a reverse mortgage?
Yes. If your estate plans include your home held in a trust, you can still qualify for a reverse mortgage. In most cases you will simply need to include a full copy of the trust as part of the loan process. In a few cases (such as irrevocable trusts), your trust may need slight modifications in order to be eligible.
We encourage anyone considering a reverse mortgage to understand the facts and involve family members in a conversation. If you still have questions about reverse mortgages and your estate, our experts are here to help.