Time and Talk…
Posted July 2, 2017 in Real Estate Trends
The rules are better than ever to take time and talk about reverse mortgage options.
Reverse mortgages offer homeowners a way to pay for home-healthcare and allow aging in place among other considerations while keeping their money invested. The current FHA rules allow a spouse, even if under age 62, who isn’t a borrower on the reverse mortgage to remain in the home as long as he or she wants. The spouse would not receive the monthly payments of equity upon the conclusion of the borrower’s loan; however, interest will continue to accrue but without a lender deadline as was earlier done.
Many persons are not familiar with the benefits of a reverse mortgage product. After a reverse-mortgage borrower dies, heirs will receive a letter from FHA stating the balance of the loan. The heir(s) or estate administrator is then given 30 days to respond whether the loan will be repaid or whether the home will be sold. If no response is provided, foreclosure proceedings may be initiated by the bank.
The reverse-mortgage market in the U.S. creates about 60,000 loans annually according to the National Reverse Mortgage Lenders Association (NRMLA). Since home values are increasing especially this year, those persons over age 62 are enjoying more equity in their homes than at any time since 2008. Home equity within that age group is almost reaching $4 trillion. Of that equity, close to 80% is paid off and potentially borrowable via a reverse mortgage according to NRMLA data.
Here are a few tips to consider to get you talking:
- Talk, talk and talk. Share and review the rules on the loan with your spouse, children or other heirs.
- Know your home’s value. Most homes that are sold after a reverse mortgage concludes involve a home that is higher in value than the loan amount. Reverse mortgages are nonrecourse loans, which means that if a home sells for less than the loan value, the heir is never responsible for the difference.
- Interest accrual and deduction. Interest will continue to accrue until the loan is paid; however, the estate gets a sizable mortgage-interest deduction on its tax return. Always talk with your lender about your options. You might be surprised to learn how helpful your home can be for your health.
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