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Reverse Mortgage — Don’t Look Back!

By Terry Savage on January 02, 2022 | Housing / Real Estate

Parents have a RM however when taken out they failed to put in heirs in case of their demise only one is still alive at this point and after talking with RM to have any recourse the amount to be refinanced is extreme to say the least with interest rates steadily rising…is there anything that can be done to mitigate these circumstances before or after the a situation of death occurs?? Please advise could be done short of having to just leaving the family building???

Terry Says

When your parents took out their reverse mortgage they (and perhaps you as heirs) should have been counseled that after all fees and high interest rates, there would likely be very little left over at their death. But the money would not have to be repaid until they moved out –or died. As a plus, if they elected to receive a monthly payment, they could never “run out” of equity in their home.

I did that for my Dad — and he lived to be 95, and got a lot more money out of his RM than the lender ever expected! (In fact, they used to send an inspector around to ask the neighbors “if Jerry still lived there”! He did — until a week before his passing!)

Sorry about the fact that you — as heirs — won’t have much, if anything, left over after your parents pass on. But at least they can live in their home until their death — assuming that’s still works for them. Once you move them out, you can either pay off the balance and any extra cash should be used for their care in a nursing facility. Or wait until they die, and see if there is any equity left. In that case, remaining equity after sale would be distributed to heirs according to their will. (There are no “heirs” to a home with a reverse mortgage, since the lender has the first lien.)

What do you get out of this? The very good feeling that they get to stay in their home as long as they can!!



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