FAQ & Common Myths
Will The Bank Own My Home?
No, you cannot lose your home under normal circumstances and you retain
Does It Effect My Children's Inheritance?
The concern about the impact that a reverse mortgage may have on the kids is a common question we hear. However, with the recent changes to the reverse mortgage program, there are actually many benefits to the heirs versus a conventional mortgage.
Here are some things to consider:
First: The money to pay for living expenses has to come from somewhere. Whether you are withdrawing money from a checking account, retirement account or your home’s equity, your overall net worth will remain about the same in the end, so the children can expect a similar inheritance in any scenario…even by leveraging your home’s equity with a reverse mortgage. However, one big difference is, once a checking account or retirement account is depleted, there is no chance for it to recover, unlike a home’s equity, making it a potentially safer financial strategy.
Second: The heirs will inherit any remaining equity in the home, not the bank. In fact, if the home appreciates at a modest 4% rate each year, the current equity will be preserved in almost all scenarios.
Third: In the unlikely event that the reverse mortgage loan balance exceeds the home value upon the last spouse leaving the home, the reverse mortgage loan is unique in that the heirs will not have to repay any negative equity. That is
Lastly: There are potentially significant tax advantages to the heirs on a reverse mortgage that a conventional mortgage doesn’t allow. For example, the heirs may get to deduct the accrued interest on the reverse mortgage when they sell the home, potentially giving them a tax-free earnings year (please consult with a CPA).
As you can see, a reverse mortgage offers a number of benefits and protections for the heirs. Please contact us if you would like to discuss this in more detail.
What If I Already Have a Mortgage?
What If I Live to Be 110 Years Old?
Are Reverse Mortgages Safe for Seniors?
One of the most important changes to the product was a significant decrease in closing costs and lower interest rates. These two factors now allow thousands of seniors to preserve more equity in their home during the lifetime of the loan.
Another important guideline change addressed the issue of the ‘large, lump sum’. In the past, the senior was able to take out a significant amount of cash from their home all at once, which led to overspending, gifting, vacations and other expenditures, which quickly depleted the funds and quickly put them in financial trouble. The current laws strictly limit how much cash the senior can take in the first year of the reverse mortgage, thus lowering the chances of ‘over-spending’.
The last important law change that recently went into effect in August of 2014 has to do with non-borrowing spouses. At the time the reverse mortgage is taken out, sometimes only one spouse is on the loan typically because they do not meet the minimum age requirement of 62. Previously, if the borrower on the loan were to pass or move out of the home, the surviving spouse would be forced to pay back the entire reverse mortgage in full – which meant many times being forced sell the home and leave. With the current rules, the surviving, eligible, non-borrowing spouse, may remain in the home and is not responsible for repayment until they no longer occupy the home as their primary residence or fail to meet the obligations of the loan.
What Are the Differences Between a Reverse Mortgage and a Home Equity Line of Credit?
Call 1-800-549-8888 to learn more about our ReverseFLEX loan options
2000 Broadway St.
Redwood City, CA 94063
5170 Golden Foothills Pkwy
El Dorado Hills, CA 95762
2173 Salk Avenue Suite 250
Carlsbad, CA 92008
CA Bur of Real Estate - Real Estate Broker - Broker#01514348.
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
Any rates quoted are not guaranteed and are subject to market fluctuations.