You Still Own Your Home When You Get A Reverse Mortgage

9/19/2007

posted by N. Sioris

Stumble It!

One of the most pervasive misconceptions about Reverse Mortgages is that the senior no longer owns their home. This could not be further from the truth.

Working in this industry for some time now, it still amazes me that so many people think that they no longer have the ability to leave their home to their heirs, if they take out a reverse mortgage. Or they are under the misconception that if their heirs would like to keep the house, then the heirs have to "buy back" the house from the lender. Again, this is not the case. The lender does not own your home if you take out a reverse mortgage.

Here is what happens: If you take out a reverse mortgage, you are still the owner of your home. Your name remains on the title. The lender has a mortgage lien on your property in the same way that a mortgage lender does on a traditional forward mortgage. When you pass away or permanently leave your home, the reverse mortgage must be repaid. (Just the same as if you passed away with a regular conventional mortgage on your home).

If you have left the home to your heirs as part of your estate, they have two choices. They can either keep the home or sell the home.

If they keep the home, they must pay off the reverse mortgage lender by getting a new traditional mortgage, or they can pay off the reverse mortgage lender with other assets that they may have. If they sell the home, then they can pay off the reverse mortgage lender from the sale proceeds of the home.

If there is more value in the home than what is owed to the reverse mortgage lender, then the heirs get the extra money. If the reverse mortgage balance is greater than what the home can be sold for, the reverse mortgage lender settles for the amount of the sale. Your heirs are not liable for any shortfall if the house is worth less than what is owed on the reverse mortgage.

Myths and misconceptions about Reverse Mortgages are often the reasons why people reject the very idea of looking into a reverse mortgage in the first place. You owe it to yourself to find out the facts before jumping to a conclusion that a reverse mortgage is a bad idea.