These are things you must know before taking out a reverse mortgage. Read further to see how a reverse mortgage can affect your estate.
For some seniors, retirement is not whet they thought it would be and they find themselves going without necessities such as enough money to pay the bills and to do home repairs. But in some cases a reverse mortgage is just what is needed to remedy the situation
How Does A Reverse Mortgage Work?
Many seniors find that a reverse mortgage is just what they need to live a comfortable retirement. A reverse mortgage works in a different fashion than a regular mortgage.
With a regular mortgage the borrower is scrutinized for things such as their credit score, how much money they have coming in and how much debt they carry. They must also make monthly payments on the regular mortgage in order to pay of the bank so they can stay in the house. A reverse mortgage is just for seniors 62 or older and credit, income, are not a factor. But they must have enough equity in the house in order to for the lender to take out payments. If the borrower has another mortgage on the house, that mortgage must be paid off with the monies received from the reverse mortgage before a homeowner can start to receive payments. So with a reverse mortgage there is going to be less money left in the borrowers estate as time passes, unlike a regular mortgage where equity is accruing.
Will Heirs Still Have An Inheritance?
A borrower will probably want to know how taking out a reverse mortgage will affect their estate when they are gone. For those that want to leave property for their heirs It is important to know that if the heirs want to keep the house, they must make payments on the loan that was taken out by the borrower when they pass away. In many cases the heirs have no plans to keep the house. In this case the house can be sold, the loan paid off and the remaining balance would go to the heirs.
Are Benefits Affected?
If the homeowner is receiving social security, pension benefits or Medicare, these benefits won’t be affected by a reverse mortgage. But there are different rules that apply if the homeowner receives Medicaid. They won’t have to pay taxes on the loan because the IRS does not consider the proceeds of the reverse loan as income
Discuss Questions with Your House Counselor
Since house counseling by a HUD approved house counseling agency before receiving a reverse mortgage is mandatory. A borrower concerned about how a reverse mortgage will affect their estate should also discuss their issues with the house counseling
Related posts: