Reverse Mortgage Myth Series: Myth #1 The bank gets any remaining equity when I die.
As a HECM Reverse Mortgage Specialist, I’ve learned there are a few common misconceptions out there about Reverse Mortgages. As I meet with many of my clients for the first time I find out that they have put off doing a Reverse Mortgage sooner because of the myths they were told. But once we dig deeper and clarify the truth it becomes obvious their fears were unfounded and they could have been enjoying the benefits of a Reverse Mortgage much sooner.
Over the next couple of weeks, I’m going to expose some of these myths and present the truth. I hope that if you or someone you love is considering a Reverse Mortgage you’ll find the answers you’re looking for or at least get enough clarity to further the conversation by giving me a call.
My articles will explain common concerns having to do with:
- Who really owns the home with a Reverse Mortgage
- What happens to the home and equity when I die?
- How are the Children and estate affected by a Reverse Mortgage?
So, without further ado let’s dive into Myth #1
Myth #1: The Bank gets any remaining equity when I die.
Quite simply this is false. The only claim the bank has upon your equity is the balance of the mortgage and accrued interest that develops over time. For example:
Let’s suppose your home is worth $400,000 and your Reverse Mortgage has a starting balance of $100,000. Let’s also imagine that over the course of your life between the time you get your Reverse Mortgage until the day you pass away, your loan accrues $70,000 of interest. When you pass away the balance due to the bank is $170,000. All other remaining equity belongs to your estate, no if’s, and’s, or but’s.
There is no way for us to predict how much equity will be left in your home upon death simply because 1. We cannot guess how long the homeowner will live and 2. we are even less capable of predicting what the housing markets and appreciation will do over the next 10-40 years.
In my experience, I’ve seen that most Reverse Mortgages are designed and predicted to break even with the value of your home by around the age of 92-96. This means that if all borrowers on the Reverse Mortgage have passed away before this age there is a good chance there will be remaining equity for the estate. At this point, the estate and heirs can choose to buy the home and keep the equity in the home itself or to sell the home and take the equity in cash. Neither the Bank nor FHA/HUD have any claim on any equity in the home once the mortgage has been paid.
If you have any questions or concerns about a HECM Reverse Mortgage for yourself or someone you love, please call me so I can answer them.
Trevor Carlson
HECM Reverse Mortgage Specialist
Heritage Reverse Mortgage
435 215 1883
trevor@heritagehl.com
Company NML# 1497455 Trevor’s NMLS #267962