If you or a loved one are 62 or older and have considerable home equity, it may be wise to consider a reverse mortgage. A reverse mortgage is a loan, but it is not the same as the type of mortgage you get when you are buying a house — that’s called a forward mortgage. Unlike with a forward mortgage, reverse mortgages don’t require you to make any loan payments until one of two things happens: you die or you decide to move away and sell your home. At that time, the money from the sale of your home is used to pay back the loan.
How will I receive funds with a reverse mortgage?
There are some options! You may be able to receive the funds:
- As a lump sum
- In fixed monthly payments
- As a line of credit.
What happens if the amount I borrow becomes greater than the value of my house?
The federal government strictly regulates the way reverse mortgages or structured to prevent this from happening. However, it can still sometimes happen if your house decreases significantly in value or if you are receiving monthly payments and you live longer than your lender thought possible. If this happens, you (or your estate) will not be responsible for paying any amount beyond the value of the home.
What are the downsides of a reverse mortgage?
There are certainly some things to look out for and consider when it comes to reverse mortgages:
- If someone, like a friend or family member, lives with you, they will have to move after you pass away because the home will have to be sold.
- Some people prefer to save their equity.
- You will have to sell your home if you need to move into a nursing home or other type of assisted living facility for any more than a year.
- There are many scams targeting seniors using reverse mortgages.
Who can help me decide if a reverse mortgage is right for me?
If you’re considering a reverse mortgage, it’s a great idea to partner with an attorney who has a strong background in both real estate and estate planning. The Matus Law Firm is here to help. Give us a call at (732) 281-0060, and we’ll schedule a time to discuss your options. We can’t wait to hear from you!