Regular or Reverse Mortgage: What Really Happens to Your Estate
Many homeowners worry that a Reverse Mortgage will take their home or leave nothing for their children. This is one of the biggest misconceptions I hear. The truth is that your estate works the same way whether you have a traditional mortgage or a Home Equity Conversion Mortgage.
The basics
If you have a regular mortgage, the home is still yours. You are on title. When you pass away, your heirs inherit the home, and they also inherit the responsibility to pay off what is owed. Most families either sell the home and keep what is left after the loan is paid off, or they refinance the loan into their own name if they want to keep the home.
A Reverse Mortgage works the same way.
What happens with a Reverse Mortgage
With a Reverse Mortgage, you stay on title and keep full ownership. You are simply not required to make monthly payments while you live in the home. When the last borrower passes away or moves out, your heirs have the same choices they would have with any other mortgage.
- Sell the home and keep any remaining equity after the loan is paid off.
- Refinance the loan if they want to keep the home.
- Walk away with no personal responsibility if the home is worth less than the balance owed. This is because a HECM is federally insured and non-recourse.
The key point
Your heirs never lose ownership rights or control of the property. The only real difference between a regular mortgage and a Reverse Mortgage is when the payments are made. During your lifetime or after you are gone.
With a Reverse Mortgage you are choosing to use your home’s equity to make life easier while you are living. You are not giving the house away. You are keeping the same choices your family would have with any other mortgage.
Final thought
Your home is your legacy. A Reverse Mortgage does not change that. It only changes when the equity is used.
If you live in MD, DC or VA and are considering a Reverse Mortgage, Give me a call.
