Reverse Mortgages - 10 things to know
Frequently Asked Questions about HUD’s Reverse Mortgages
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten
6. Will we have an estate that we can leave to heirs?
When the home is sold or no longer used as a primary residence, the cash,
interest, and other HECM finance charges must be repaid. All proceeds beyond
the amount owed belong to your spouse or estate. This means any remaining
equity can be transferred to heirs. No debt is passed along to the estate or heirs.
This is not completely accurate. What if the house is underwater and sells for less than what is owed? Who is the reverse mortgage company going to go after if the house burns down and the owners die? The insurance companies? The kids? Someone would have to pay.
After all, they payments on the mortgage aren’t made until they die, so if they live well beyond the expected lifespan the interest payment would be enormous. Possibly greater than the value of the home.
Plus, the estate may be passed on to heirs, but the house would not, as it would have to be sold unless the beneficiaries can pay off the remaining debt with cash. If they are forced to sell the “family home,” there is also the cost of selling, like commissions, fees, etc.
The intrinsic problem is that it forces an individual or group to perform an action based upon the actions of another individual or group. It forces you to divest of something you have received without any consideration of your desire to keep it or not.
Sounds a lot like Obamacare
“If you like your [family home], you can keep it...NOT”