A reverse mortgage is different than a conventional mortgage. A reverse mortgage is used by seniors who own homes. It seeks to allow them to utilize a portion of the home’s equity as collateral for a loan. The loan is usually not repaid until the homeowner or his or her surviving spouse dies or permanently moves out of the home. Most reverse mortgages give the estate of the homeowner 6 months either to sell the home and pay off the balance due on the mortgage or make other arrangements to satisfy the mortgage.
The Estate and the Reverse Mortgage
In the event there is not enough equity in the home to pay off what is owed on the reverse mortgage the estate and the heirs are not liable for the unpaid portion of the reverse mortgage.
Eligibility for Reverse Mortgage
A homeowner must be a minimum of 62 years of age to be eligible for a reverse mortgage. If the homeowner does not own the home free and clear, all existing prior mortgages must be paid off from the proceeds of the reverse mortgage. If there are other liens or judgments, they also must be paid from the reverse mortgage. There are also financial eligibility requirements necessary to obtain a reverse mortgage.
Obligations Involving Reverse Mortgages
Reverse mortgages are usually only given on homes which are an individual’s primary residence. The homeowner is responsible for paying the property taxes on the home. In addition the homeowner must pay for the homeowner’s insurance and maintain the home according federal housing administration requirements.
Estate Issues
When both of the homeowners die or when the home is no longer the primary residence of either of the homeowners for a period in excess of a year the reverse mortgage can be called due. At that point the homeowners or the estate of the homeowners can either repay the reverse mortgage or have the house listed for sale. If upon the sale of the home more funds are received than are owed on the reverse mortgage, the balance of the funds received over and above the repayment of the reverse mortgage belong to the estate. If there are not sufficient funds to pay off the reverse mortgage, the bank loses out and can’t recover the portion of the amount owed which is in excess of the sale price of the home.
Is a Reverse Mortgage Right for You
A reverse mortgage allows senior homeowners to access funds which are tied up in the equity of their homes. Sometimes this is an appropriate action to be taken. However, it is not always appropriate. A reverse mortgage will not give the homeowner access to 100% of the funds in the house. Reverse mortgages usually only give the homeowner 60 or 70% of the funds related to the equity in the house. In some cases it is simply better for the homeowner to sell the home, rent an apartment and move into a less expensive residence.
Elliot S. Schlissel, Esq. is a foreclosure attorney who has been representing homeowners with regard to reverse mortgages, foreclosures and other real estate related issues for more than 3 decades. He can be reached for a free consultation at 800-344-6431 or e-mailed at Elliot@sdnylaw.com.
