Will the Lender Keep the Remaining Equity of My Reverse Mortgage
Of the top concerns on my customers minds what happens to the home and remaining equity after death must be near the top of the list. Somehow, misinformation regarding this subject is rampant.
Reverse mortgage companies lend first and foremost on the appraised value of the home. A borrower can expect to see from fifty to seventy five percent of value.
Interest accumulates on top of itself and the loan to the senior borrowers. This is how reverse mortgage lenders make money. Only upon death and/or sale of the home is the loan typically required to be repaid to the lender.
Reverse mortgage companies are very careful about how much money they lend in relation to the value of the home. This is why age plays such an important role in this calculation.
Based upon the calculation their bets are relatively covered and the vast majority of borrowers will have equity at their passing or when the home is sold, whichever comes sooner.
In the circumstance the borrower passes away the home is willed to the estate. The bank gives the estate about twelve months to get the home sold.
Remember, a reverse mortgage lender makes money while the home is accumulating interest. It doesnt want to take the home back. So, as long as the heirs abide by FHA guidelines while selling the home, the lender will offer extensions.
Of course the home always gets sold and the mortgage company gets their fair share of the proceeds. They are not, as many people still believe, entitled to all of the remaining proceeds.
Any remaining equity goes to the borrower's estate. The myth abounds in the senior community that the bank is entitled to this money.
Sooner or later a borrower lives fifteen years longer than expected, the actuarial tables explode, and the mortgage exceeds the value of the house. No problem.
Reverse mortgages are known as non-recourse loans. This means if more is owed that home can actually sell for to repay the bank, the heirs or borrower are not on the hook for the difference.
These mortgages are pretty safe bets for the borrower and the borrowers heirs.
Reverse mortgage companies lend first and foremost on the appraised value of the home. A borrower can expect to see from fifty to seventy five percent of value.
Interest accumulates on top of itself and the loan to the senior borrowers. This is how reverse mortgage lenders make money. Only upon death and/or sale of the home is the loan typically required to be repaid to the lender.
Reverse mortgage companies are very careful about how much money they lend in relation to the value of the home. This is why age plays such an important role in this calculation.
Based upon the calculation their bets are relatively covered and the vast majority of borrowers will have equity at their passing or when the home is sold, whichever comes sooner.
In the circumstance the borrower passes away the home is willed to the estate. The bank gives the estate about twelve months to get the home sold.
Remember, a reverse mortgage lender makes money while the home is accumulating interest. It doesnt want to take the home back. So, as long as the heirs abide by FHA guidelines while selling the home, the lender will offer extensions.
Of course the home always gets sold and the mortgage company gets their fair share of the proceeds. They are not, as many people still believe, entitled to all of the remaining proceeds.
Any remaining equity goes to the borrower's estate. The myth abounds in the senior community that the bank is entitled to this money.
Sooner or later a borrower lives fifteen years longer than expected, the actuarial tables explode, and the mortgage exceeds the value of the house. No problem.
Reverse mortgages are known as non-recourse loans. This means if more is owed that home can actually sell for to repay the bank, the heirs or borrower are not on the hook for the difference.
These mortgages are pretty safe bets for the borrower and the borrowers heirs.
About the Author:
Get the skinny in great guide book on the HECM in California, also known as a reverse mortgage, here. Many questions answered regarding the California reverse mortgage in this educational site.
posted by Credit Counseling at
9:05 AM
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