What Do They Need to Know
Home Equity Conversion Mortgages are a popular option for seniors planning to age in place. If your parents are looking in to this option, there are some things to make sure they understand as they move forward.
Is Counseling Required?
The federal government requires anyone interested in moving forward with a HECM to participate in reverse mortgage counseling approved by the Department of Housing and Urban Development agency (HUD). During the counseling session, the counselor will explain how a HECM works, any costs that may be associated with the loan, other options that may be available and will answer any questions your parents may have.
How Much Money Will They Receive?
There isn’t a universal amount of funding that borrowers receive. The amount will depend on the age of the youngest borrower, the amount of equity in the home, current interest rates, the home value and sale price or maximum lending limit.
What Happens When My Parents Pass Away?
When your parents no longer live in the home, the full amount of the loan becomes due. The heirs will not be required to pay more than the value of the home at that time, even if the loan balance exceeds the value of the home. Some heirs choose to pay off the loan to prevent selling the home. In this case, the full amount of the loan must be repaid even if the balance is higher than the home’s value.
If only one of your parents is on the title of the home, the reverse mortgage will not automatically transfer to the surviving, non-borrowing spouse and the loan will become due. This is also true for adult children or others living with the borrower.