Kiplinger Magazine posted a great piece last month entitled, “What Heirs Need to Know About Reverse Mortgages“.
Here are a few of the key points that I think consumers considering a reverse mortgage should take into account:
- “At the death of the last borrower, though, adult children and other nonspouse heirs must pay off the loan. They can keep the property, sell the property or turn the keys over to the lender.“
- “The good news for heirs is that reverse mortgages are “nonrecourse” loans. That means if the loan amount exceeds the home’s value, the lender cannot go after the rest of the estate or the heirs’ other assets for payment.“
- “When the last owner dies, the estate’s executor should contact the lender. Loan proceeds disbursed as monthly payments will stop. If the borrower took a line of credit, that line will be closed.“
If any equity exists in the home and the heirs elect to sell, the estate will receive the equity after the loan and other settlement fees are satisfied.