Hello Carolyn,

I have heard several people ask the same question and I am not sure where the misinformation comes from that starts this concern. But I’m glad you asked. When you choose to take a reverse mortgage, you can repay the loan at any time or your heirs can repay the loan after you pass and keep the property or sell the home, but the only portion of the loan that is owed is anything you actually borrowed plus the interest that accrued on that amount. 

Let’s look at that for someone such as yourself at 83 years of age.  If you and your husband were eligible for $300,000, you may choose to only take a small portion of that amount each year.  Many borrowers use the funds to make some home repairs, pay for expenses and maybe a small monthly stipend to make their lives much easier.  Suppose you only used $120,000 of the money available to you by the time you were forced to leave the home or passed.  You don’t have to pay the $300,000 loan amount you qualified for, just the $120,000 you actually used over the years and since you didn’t borrow it all at once, you accrued interest on funds as you borrowed them so you didn’t even accrue interest on all $120,000 all at one time for the entire time either.  You or your heirs would pay the loan off for the amount you actually borrowed plus the accrued interest.

You always own the home and you decide who will inherit your property.  They will need to repay the loan at that time by paying the loan off with funds available to them, with other financing, or by selling the home.  If you borrowed all the funds available right away and accrued interest for many years and your home did not appreciate or lost value or fell into such disrepair that the family did not want the responsibility of keeping the property (which is not probable but is possible), they can walk away and owe nothing. They have no liability whatsoever if they do not choose to keep the home. 

So there is never a “danger” to your heirs as they have no liability.  When you pass leaving them your home, they choose what they want to do without any liability and all equity belongs to you or your heirs. The home always belongs to you, not the lender.  You have full control over what you borrow and who receives your home when you pass, we recommend you talk to an estate attorney to determine the most appropriate estate planning for your circumstances (will, trust, etc.).  Compare different scenarios with our calculator.  Some will give you more money and less equity to pass to heirs while other options would give you less money for your personal use but would preserve more equity to leave to others.  

There is no right or wrong option, only the one that best works for your circumstances and meets your goals.  Reverse mortgages are not right for everyone.   If you are concerned about using all your funds or passing an asset to heirs, try the line of credit option or the monthly payment option using different monthly amounts to see if that will meet your needs.  If after reviewing the options, you feel none will allow you to achieve what you need to achieve with the loan, then you may need to consider other alternatives.  It might also make you feel a lot more comfortable with the loan.  

Don’t forget to take a look at the amortization schedule as that will show you how quickly you will accrue money owed and an estimate of the equity in your home. No one can tell you for sure what interest rates will be in the future or how property values will increase or decrease so it is only an estimate, but it is a good indicator of how the loan will perform based on how you use your loan.