Question #1

HOW MUCH INTEREST IS ACCUMULATED ON A $100,000 REVERSE MORTGAGE AT THE END OF 10 YEARS TO PAY BACK..

Question #2

WHAT IF YOUR HOUSE PROPERTY DEVALUES WAY BELOW AMOUNT GIVEN AND YOU HAVE NO WAY TO ECONOMICALLY PAY BACK..EA.HOUSING SLUMP….

Question #3

HOW DOES A REVERSE MORTGAGE WORK FOR MY HEIRS? IS IT POSSIBLE TO PUT ONE OF YOUR CHILDREN ON THE OFFICIAL LOAN APPLICATION SO AS TO KEEP HOME IN FAMILY AND HAVE A PLACE TO LIVE IN AND RAISE A NEW FAMILY (GRANDCHILDREN)…THIS WOULD BE WHAT AMERICA STANDS FOR… PURSUIT OF HAPPINESS..TRUE GOVERNMENT RESPONSIBILITY IN THESE TYPES OF MATTERS SHOULD ALLOW FOR THIS KIND OF LOAN.. THAT’S WHAT MAKES AMERICA GREAT..TAKE OUT THE GREED.. AND HAVE FAITH IN ITS TRUE CITIZENS….SINCERELY

Hi Salvatore,

All borrowers have to be owners of the property and 62 years of age or older.  You can have a parent and a child on a reverse mortgage so long as they both are on title to the property and meet the minimum age requirement.  Because the loan allows borrowers to stay in the home for the rest of their lives without making a payment, the loan does not allow for multi-generational borrowers in the same family who are not at least 62 years of age because being a loan, the funds do have to be repaid.  This is the difference between a loan and a grant or gift that you are describing.

The funds for the loan are made available by investors, people just like you and me, who buy the government insured bonds in expectation that they will be repaid at some point in the future. Left outstanding indefinitely with no repayments, no investors would invest in such bonds and the reverse mortgage would not be available.  Whether or not it is the government’s responsibility to give everyone free housing (or whether or not the “government” even does it when the funds have to come from taxpayers in the first place) is a discussion for another time and place.

The interest that accrues depends on the type of loan that you take, whether all funds are taken at one time or whether you take funds as you go, interest rates in effect at the time, and whether or not you choose to make any payments on the loan (payments are not required on a reverse mortgage but there is never a prepayment penalty and some borrowers choose to make payments monthly, quarterly or annually to limit growing balances.

The best thing you can do in this area if you would like to compare different scenarios is to request a free, no obligation proposal that will be geared to your requirements and the parameters in effect at the time.

Finally, a reverse mortgage loan is a “non-recourse” loan.  In other words, the borrower(s) can remain living in the home for the rest of their lives and it makes no difference what the value of the property does.  If the values plummet, the borrowers and their heirs are protected.  When the borrower’s pass, heirs can opt to keep the home and pay off the existing loan at the balance owed or 95% of the current market value, whichever is less, or they can choose to walk away from the property with no consequences.

The lender can seek repayment of the loan from no other assets of the borrowers – only the house.  So if the heirs know that the home is worth less than the amount owed on the mortgage (as was the case with many forward and reverse mortgage loans taken out up to 2009 that paid off up to 2012 before homes began to appreciate again), the heirs can simply package up their loved ones’ belongings and let the lender handle the sale of the property and even if the borrowers had cash assets in the bank, the lender cannot seek repayment from those assets.

Additional Help:

Reverse Mortgage Heirs: How Much Will You Owe?

HUD- About Reverse Mortgages for Seniors (HECM)

Steps for Heirs to Repay Reverse Mortgage After Death