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Are reverse mortgages safe?

Posted on: 26th Mar, 2004 03:55 am
When you take out a reverse mortgage, you remain the owner of the home just as in any traditional mortgage. So, you are still liable to pay the property taxes, homeowner insurance and making home repairs. In case you fail to pay them off, the lender may demand repayment of the loan.

Is there any chance of default?


Reverse mortgages are quite safe as there's no chance of default because you aren't making monthly payments. And the loan needs to be paid off by your heirs when you die. This can be done by selling or refinancing the home. But the home value has to exceed what you owe. Otherwise, the heirs can simply pay off the debt and retain the home.

Can the lender claim more than property value?


Moreover, when the lender sells off property in order to get back the money he has invested, any extra proceeds exceeding the home value is handed over to the borrower or his heirs. However, it may happen that the sale proceeds aren't enough to satisfy the debt. In such a case, the lender cannot claim more than what the property is valued at the time of its sale. This is because reverse mortgage is a non-recourse loan. So, the lender may not come after your income and assets or ask you heirs to pay off the remaining balance.

Thus, reverse mortgages are quite safe as there are no chances of default and the lender won't come after you and claim more than the value of your property.

Related Articles:
Reverse Mortgages - How seniors tap equity for extra cash

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Hi Missy!

Welcome to forums!

You will get a reverse loan based on the equity that you have in the property. You can use that equity to pay off your credit cards, go for home improvements. etc. You should speak to your lender and clarify as to why you were denied of reverse loan.

If your property is underwater and if you are unable to pay off your dues, then the lender has the rights to foreclose the property. Thus, you would lose your home.

Sussane
Posted on: 26th Feb, 2010 11:24 pm
Does AXIS BANK in India operates on with RM ? Do they Give Lump Sum amount ? If So, what is the Max % against the Total assessed current value of the house? If axis Bank does not have any such RM scheme, what are the other Banks who operate with the RM schemes?
Also, does the owner of the house can sell his property before his death and pay back the Mortgage amount to the lender and the remaining ( the difference between the actual sale vaule and the RM amount ) proceeds of the house sold coud then remain with the Owner. Is there any minimum time oeriod that the owmner has to wait before trying to sell his house and pay off the RM loan amount?
Posted on: 07th Apr, 2010 01:03 pm
You need to contact the Axis Bank, India in order to get information in this regard.
Posted on: 08th Apr, 2010 09:54 pm
IF I GET A REVERSE MORGAGE ON MY HOME, AND DECIDE MAYBE 5 YEARS DOWN THE ROAD I WANT TO SELL. ARE THEY ANY INTEREST,THAT I HAVE TO PAY ON TOP OF THE VALUE ,OR MONIES I RECEIVED FOR MY HOME?
Posted on: 10th Apr, 2010 07:00 pm
You'll have to pay off the money that you've received as reverse mortgage.
Posted on: 12th Apr, 2010 04:22 am
My grandmother is in a nursing home and has been there for 5-6 years and is on masshealth/medcaid. My grandmother has a life estate in her house and my aunt lives in the house and wants to do a reverse mortgage. Will my grandmother lose her insurance due to my aunt doing a reverse mortgage?
Posted on: 06th Aug, 2010 10:49 am
Your scenario is comprehensive and you really need to review that question with an Estate Planning Attorney to ensure the process is done properly, so you Grandmother doesn't lose her Medicare benefits.
Posted on: 08th Aug, 2010 09:30 am
my husband and i have a rm. i do not want to stay in house after he dies. can i just let the bank have it?
Posted on: 11th Sep, 2010 12:42 pm
>>can i just let the bank have it?

Yes, but that'd be a poor financial decision if there is equity left in the house at that time. In that scenario, it'd be better for you to sell the house yourself, pay back the Reverse Mortgage, and keep the rest of the money for yourself.
Posted on: 11th Sep, 2010 03:23 pm
Absolutely right...I think it would be downright foolish to simply walk away from a property that might have sufficient equity in it to provide some real "walking away" money.
Posted on: 17th Sep, 2010 11:09 am
I was a live in healthcare provider who in lieu of opart of my salary received room. And board.I was told by the family that after their grandparents passed I could stay here as long as I wanted to. I just found out that there is a reverse mortgage on the house. Hiw long do I legally have before I have to move? I also paid bills.
Posted on: 20th Sep, 2010 03:57 pm
If the heirs refinance the mortgage, then they will become liable for the dues and you'll be able to stay in the property as long as you feel like. However, if the heirs do not refinance the loan within 3 months, the lender will sell it off and you'll have to leave the property.
Posted on: 21st Sep, 2010 02:26 am
I disagree with that, Niicss. In my experience, I have found that lenders will work with the heirs of a deceased borrower until a solution is found. They generally give everyone a year to obtain a new loan or sell the home, but they're also a bit realistic and realize that it may take longer, so they'll often extend that timeframe.

Sajada, don't get discouraged here - keep working with the family and let them know what you've found out here.
Posted on: 21st Sep, 2010 10:23 am
Can I obtain a reverse mortgage on my coop apartment. I live in Seattle, I
own the apartment free and clear. The apartment is worth about $300K, how much could I get a month using reverse mortgage (approx)?
Posted on: 20th Nov, 2010 11:13 am
Welcome Guest,

You will have to contact the local reverse mortgage lenders and check out if they can help you with a reverse mortgage. However, not all lenders will be ready to give you a reverse mortgage on coop.
Posted on: 22nd Nov, 2010 02:29 am
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