There are many options available to seniors who would like access to liquid assets, and reverse mortgages are one of the most common – and misunderstood. Our elder law attorneys have outlined some important things you need to know about reverse mortgages, so you have the information you need to make the best choice possible.

What is a reverse mortgage?
A reverse mortgage is a financial tool available to seniors aged 62 and older who own their homes. It allows them to use their home equity as collateral to receive a lump sum, line of credit, or annuity to receive money. This makes the homeowner the borrower and the bank the lender, which means that interest will need to be paid on the monthly repayments to the lender.

When is the reverse mortgage loan due?
Typically, the borrower is responsible to make monthly payments to the lender until the amount that is borrowed is paid back. However, there are certain circumstances where the entire amount of the loan could be called due:

  • The borrower lives in a different primary residence. You must live in the home if you have a reverse mortgage, even if you still own the home. The lender will call the loan due if you rent out the home or move out for any other reason.
  • The borrower does not live in the home for 12 consecutive months due to health reasons. A senior suffering from health conditions who moves into a nursing home must move back to the home within 12 months, otherwise, the loan will be due.
  • The home is sold. The loan will be called due if the borrower either sells the home or transfers the title of the home to another person who is not also a borrower of the reverse mortgage.
  • The borrower passes away. There are cases where a non-borrowing spouse may be able to remain in the home after their spouse passes away, but certain conditions must be met. It’s best to speak with an experienced elder law attorney to find out how to avoid leaving the house if the loan is called due upon the passing of a spouse.
  • The loan agreement is breached. Reasons for a loan breach included non-payment of property taxes, a lapse in homeowner’s insurance, or if the house falls into disrepair.

Obtaining a reverse mortgage could be beneficial in certain circumstances, but as we listed above, there are a lot of different issues you should be aware of before you take out a loan. It’s best to consult with an elder law attorney who has experience with reverse mortgages to find out if taking a loan is best for you.

If you’d like to learn more about reverse mortgages and how they can impact estate planning, or if you have a reverse mortgage and want to have your existing estate plan reviewed, please contact us at 941-909-4644 or 763-420-5087 to set up a consultation with one of our elder law attorneys.

Chuck Roulet
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Nationally Recognized Estate Planning Attorney, Author, and Speaker
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