The good news is that with an FHA-insured Home Equity Conversion Mortgage (HECM), you and your heirs are protected.
A reverse mortgage is a non-recourse loan, which means the loan is secured only by the home itself. Neither you nor your heirs will ever be personally responsible for paying more than the home’s value when the loan becomes due.
Over time, the reverse mortgage balance grows because interest is added to the loan. If home values decline or the loan remains in place for many years, it is possible for the loan balance to exceed the home’s market value.
Here’s what happens:
- If the home is sold, the reverse mortgage is repaid from the sale proceeds. If the sale price is less than the loan balance, the FHA mortgage insurance fund pays the difference. Your family does not have to come up with the extra money.
- If your heirs want to keep the home, federal rules generally allow them to pay the lesser of the loan balance or 95% of the home’s current appraised value. This allows them to retain the property without paying more than its current value.
- Other assets are protected. The lender cannot pursue your savings, investments, or other property to recover any remaining balance.
This protection is one of the most valuable features of an FHA-insured reverse mortgage. It gives homeowners the ability to access their home equity while providing peace of mind that their family will not inherit debt beyond the value of the home.
If you’re considering a reverse mortgage, it’s important to understand not only how the loan works today, but also how it protects you and your loved ones in the future.
Every homeowner’s situation is unique. Reverse mortgages are not right for everyone. I believe the best decisions are informed decisions, and I’m always happy to answer questions without obligation.
Education should always come first.
Douglas M. Jones nmls 286668
Certified Reverse Mortgage Specialist
Mortgage Magic
