Fresno Reverse Mortgage Myth #3 - A Reverse Mortgage Obligates My Heirs.

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Mortgage and Lending with Fresno/Clovis/Visalia/Madera and surrounding communities NMLS ID# 582935

 

WillAlthough a reverse mortgage does have some impact on your heirs, that impact is mostly from their uncertainty of whether or not they will be personally responsible for paying off the debt.

A reverse mortgage is a non-recourse loan secured by the property.  The lenders only recourse is to the property itself.  What does that mean to your heirs?

It means that if the home is worth more than the loan balance, then there is equity in the home.  If there is equity the heirs may wish to either sell the home, payoff the reverse & keep the “change”.   Perhaps they will choose to refinance the home to payoff the reverse and keep the home.

What if the loan balance is higher than the home value?  This situation is one that happens not just with reverse mortgages.  Many regular mortgages currently have balances higher than the home is worth and you’d be surprised at how many older homeowners are in the same boat.
The answer is this - On a reverse mortgage, the lenders only recourse is to the property itself.  What this means is that the heirs can let the lender take back the home through foreclosure and the lender will then sell the home and take that amount as payment.  Their is no “recourse” to the heirs or the estate for any shortage that the lender takes.  It will not affect the heirs credit scores nor can the lender obtain a deficiency judgement against the estate or the heirs.

So in a nutshell, the worst that can happen to the heirs is that there would be no cash coming to them from the home itself.  Any other assetts left to the heirs (insurance, cash, jewelry, furniture) cannot be touched by the lender.

 

Posted by

Jeri Carmicheal, Reverse Mortgage Consultant, Serving Fresno, Madera, Visalia and surrounding communities.

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Jeri Carmicheal

Experienced Reverse Mortgage specialist in Fresno
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