What Is A Reverse Mortgage?
What do your heirs or the estate get?
A reverse mortgage cannot be outlived. As long as at least one homeowner lives in the home (keeping taxes and insurance current and maintaining the home) the loan does not need to be repaid. Furthermore, the heirs or estate will never owe more than the home's value (a reverse mortgage cannot become "upside down") because of the FHA insurance.
Upon death or in the event that the home ceases to be the primary residence, the homeowner's estate can choose either to refinance the reverse mortgage into a forward mortgage to keep the house or to sell the home to pay the balance (the cash borrowed, plus interest, and fees).
If the equity in the home is worth more than the balance of the loan, the remaining equity belongs to the heirs. 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.
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. The lender and FHA cannot seek reimbursement of any loss from the heirs or estate.
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