Myth #2 If my home is upside down when I die my children get stuck with the bill.
Naturally, you are concerned about your children or the other heirs of your estate. Many clients have expressed concerns that they want to know their children are protected against any recourse from the bank and that the estate won’t be negatively affected by a Reverse Mortgage when they pass away.
The good news is that HECM Reverse Mortgages are non-recourse loans and are guaranteed by FHA/HUD. This guarantee is designed to protect both you as the borrower as well as your children. This means that even if your home is upside down when you pass away your heirs can never be held responsible for the shortfall because the federal government will cover any losses if this occurs.
Two examples to help further clarify this:
- If your home has Remaining Equity: As explained in my last article, if you pass away with $50,000 in equity remaining in the home, your heirs are entitled to this equity either by paying off the reverse mortgage and keeping the equity in the home or by selling the home and keeping the remaining cash.
- If your home is Upside Down: When the balance of a mortgage exceeds the value of the home at the time of passing, HUD steps in and covers the negative equity so your heirs are left free and clear.
When I explain this to people the first response is usually, ?this sounds too good to be true? but it is true. As the guidelines are currently written a Reverse Mortgage is guaranteed by the federal government until the youngest person either passes away or reaches the age of 150. So you see even if your home was $2,000,000 upside down your children can never be held liable for any portion of the balance. This guarantee from FHA/Hud is made possible by the Mortgage Insurance Fund which I wrote about in a previous article that you can find at https://heritagereversemortgage.com/reverse-mortgages-mortgage-insurance/.
HECM Reverse Mortgages are truly designed to help secure a person and family’s finances in the later years of life. There is no way to promise that the heirs will receive equity from the home at the time of passing but the children can feel peace in the knowledge that their parents can live with less stress over finances at a time when every penny counts.
If you or someone you love has questions about a HECM Reverse Mortgage call today for the answers.
Trevor Carlson
HECM Reverse Mortgage Specialist
Heritage Reverse Mortgage
435 215 1883
trevor@heritagehl.com
Company NMLS# 1497455 Trevor’s NMLS # 267962