EMAIL FRIEND Setting the Record Straight Reverse Mortgage Misconceptions You May Have Read or Heard MISCONCEPTION #2 - WE WILL HAVE NOTHING TO LEAVE TO OUR CHILDREN? Reverse mortgages are known as "non-recourse" loans, meaning that if, under the circumstance that more is owed to the lender than the home is worth, and the loan is due because of death, sale, or vacating the premises, the maximum amount the heirs are required to pay the lender is the value of the home at the time of repayment. The only asset guaranteeing the loan is the property itself. If the property value is less than the balance of the reverse mortgage, the lender cannot request other assets from the estate and must make an insurance claim for the loss to the FHA. (In the opposite situation, where the home is worth more than the balance of the loan, you or your heirs receive the additional monies.) For example, let's assume someone takes out a reverse mortgage and owes $50,000 after 5 years. Then the homeowner passes away and the estate sells the house for $250,000. The lender receives $50,000, together with the interest starting from the date that the HECM was taken until the date that the loan is paid off; the estate inherits the balance. You will never owe more than the loan balance or value of the property, whichever is less. So no debt can pass to your heirs. The lender cannot come after the family for the difference. Potential borrowers should talk with their family about reverse mortgages. Often adult children are pleased that their parents have a financial solution available to help them live more independently and be financially secure. Since you always maintain ownership, you have the freedom to leave your home to anyone you choose. Your estate will be responsible for paying back the amount of money you borrowed up to the market value of the property. In most cases, your estate will sell the home, pay back the money borrowed, and then divide the remaining funds among your heirs. The loan is designed to give you cash flow, not take away your home. Related Links: The lender or bank will take my home When the loan becomes due, the lender will sell my home. There are strict credit and income requirements You cannot have an existing mortgage on your home When the loan comes due you may owe more than the home is worth My Social Security and Medicare benefits will be affected There are restrictions on how the money is used We will have to make monthly payments We will have to pay taxes on the funds received The lender may require immediate repayment A reverse mortgage is similar to a home equity loan Reverse mortgages are predatory It's difficult to qualify for a reverse mortgage Reverse mortgages are prohibitively expensive A reverse mortgage is only for those in desperate need and/or as a last resort Reverse mortgages are not safe Other misrepresentations you may have heard For more information [ PRIVACY POLICY ]     [ TERMS OF USE ]