What Children Should Know About The Reverse Mortgage

It is important in many cases for children of a reverse mortgage borrower to have a clear understanding of how the “HECM” loan may or may not affect them.  First  and foremost, children and heirs will not owe more than the home value when sold.  A misconception that many children have when the find out that their parents are considering a reverse mortgage is that now the bank will own the home. The bank does not own the home.  The home is used to secure the HECM loan and the title remains with the borrower.  The HECM loan is similar to a forward mortgage in that they are both loans against the property.  When either the forward mortgage or the reverse mortgage is paid off, the remaining equity form the sale goes to the borrower (if still alive) or the heirs of the estate.  In many cases the parents may encounter unexpected events that may put a burden on their financial assets.  In some cases, the children are in great financial condition and would not have a problem supplementing their parents income.  However, that is not usually the case.  When the children understand the reverse mortgage it is much easier for them to see that the reverse mortgage can be a means to help their parents obtain the funds necessary to alleviate unexpected financial events.  Often it is a good idea, with the borrowers blessing, for children to be present when the loan officer is explaining the reverse mortgage to their parents.

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