When you die, if the sale of your home does not cover the amount owed on the reverse mortgage, your estate may be liable for the balance. When a reverse mortgage is granted, the lender takes extraordinary care to not over extend the value of the home. This extra effort normally guarantees that the heirs to the estate will not be liable for any balances owed after the sale of the home. This is not a one hundred percent guarantee. The housing market is in a constant state of flux. If the reverse mortgage was based on the home being able to sell for 200k and it can only sell for 150k, the heirs may be responsible for the balance.
How Can I Protect My Heirs And Still Use The Reverse Mortgage Program
The simplest way to protect your estate is to use the federally insured reverse mortgage program. More commonly known as the HECM program, the insurance policy associated with the mortgage will cover any shortfalls that happen when the home is sold. You can get a HECM mortgage through any FDA approved reverse mortgage lender. You will be required to purchase the insurance policy and continue to pay premiums on it through out the term of the mortgage. If, at the sale of your home, you cannot cover the amount owed to the reverse mortgage lender, the insurance policy will pay any remaining balance.
Do I Have To Purchase A Policy To Get This Guarantee On My Reverse Mortgage
The only fool proof way to guarantee your heirs will not be responsible for any extra debt is to purchase a policy. However, if you only access a small amount of the equity in your home you may be able to avoid this scenario also. If you do not need the full value of the equity in your home, don’t use it all. The lower amount that you owe the better off you heirs will be when the home is sold.
Related posts: