Q&A for Hiers
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A reverse mortgage loan is a unique loan that allows homeowner(s) 62 years of age and older to draw on the equity in their home. The unique aspect of this loan is that it does not require repayment until the borrower(s) sell or move out of their home, dies, fails to maintain the home, or does not otherwise comply with all obligations of the loan. Created by The U.S. Department of Housing and Urban Development (HUD), this federally insured loan goes to help those in the senior population meet their financial needs and ease money worries for greater peace of mind.
There is an initial 6 month period (to market or refinance the property) and, as long as you (heirs) are marketing the property in good faith, the servicer will allow up to two-90 extensions for a maximum of 12 months.
The loan must be repaid once the last remaining borrower(s) sell or move out of their home, dies, fails to maintain the home, or does not otherwise comply with all obligations of the loan. Once the loan is paid off, any remaining equity goes to the heirs.
No. Borrowers are prohibited from paying reverse mortgage loan proceeds to estate planning services in most circumstances.
Either your parents or the heirs can keep the home and pay the balance due on the reverse mortgage loan or they can decide to sell the home and use the proceeds to pay off the reverse mortgage loan. Either way, the remaining equity is retained by the owners or the heirs. Please note that if the borrower decides to pay off the loan, the amount they repay may be higher than if the bank foreclosed and the home is sold.
The Home Equity Conversion Mortgage (HECM) is FHA’s reverse mortgage loan product, which enables qualifying borrowers to withdraw some of the equity in their home. The HECM is a safe plan that can give older homeowners greater financial security. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements, pay for long term care insurance, establish college funds for grandchildren or anything else they wish to do with the money. They can even use a HECM to BUY a home!