Reverse Mortgages: How Does it Affect the Children or Heirs?

The biggest fear of many families considering Reverse Mortgages, is burdening the children of the elderly. Here are 10 facts about reverse mortgages, and also to address some of the fears behind qualifying for one.

1. The interest on a reverse mortgage is tax deductible, but only when the loan is paid back.  This helps the heirs to the estate.
2. Lenders are required by law to offer a reasonable interest rate for HECM loans.  The loan origination cost is capped at 2%.
3. If the value of your home is worth less than what you owe on the reverse mortgage, HUD will make up the difference.
4. There is no debt responsibility that falls to heirs and descendants.
5. You don’t make any payments on your reverse mortgage until the home is sold (by owner or borrower of the estate).
6. The revenue received on a reverse mortgage is not taxable.
7. All reverse mortgages that are federally insured must go through a counseling session with both the potential borrowers and an approved housing counselor.
8. For reverse mortgages that come in a line of credit, the unused portion earns the same interest rate as the charge for the reverse mortgage itself.
9. If you still owe on a home, the proceeds will go into paying off the home first, then giving you what’s left.
10. You (and the heirs) cannot owe more than the home’s value.

Reverse mortgages can be beneficial for many families.  Depending on each unique financial situation, talk to your children and Marks&Marks Mortgage for more details on how you and your family may benefit from reverse mortgages.