Welcome to “Ask the Pros” – where your questions meet the wisdom of those who understand the ins and outs of reverse mortgages! If you have questions about unlocking the power of your home equity, navigating the ins and outs of reverse mortgages, or making informed decisions about your financial future, you’re in the right place.
In this exclusive series, we tap into insights and expertise directly from our wonderful team members at Longbridge Financial who are helping to shape the reverse mortgage industry each day. Our team of seasoned professionals are committed to fielding common questions, unraveling complexities, and providing invaluable insights to empower you on your financial journey.
Whether you’re a homeowner considering a reverse mortgage, a financial advisor seeking new perspectives, or are simply curious about the unique retirement tool, “Ask the Pros” is your go-to source for reliable insider information. Join us as we explore the nuances of reverse mortgages, debunk myths, and uncover strategies to make the most of your home equity and make informed decisions.
Our next pro in this series is Andrew Colamartino, Reverse Mortgage Consultant here at Longbridge Financial. Andrew is part of an amazing team of loan officers who help older homeowners find greater financial peace of mind by using the power of their home equity to their advantage. We sat down with Andrew to discuss aspects of reverse mortgages and the loan process that are important for borrowers’ family members to understand.
Q: How involved can family members be in the reverse mortgage process?
A: Involving your family members in the reverse mortgage process can be very beneficial! It’s important for your loved ones to understand how a reverse mortgage works and what responsibilities they may have in the future. For instance, once a borrower passes away, it will be their duty to manage the property they inherit.
Many borrowers find it helpful to bring their children and other family members into the initial discussions about a reverse mortgage. This collaborative approach ensures that everyone understands the details and can collectively determine if a reverse mortgage is the best solution for you. Together, your family can work with you to help set up the reverse mortgage in a way that best meets your needs and ensures everyone is on the same page. Along this same line, we also always encourage you to bring a trusted financial advisor into the conversation to further ensure the decision to obtain a reverse mortgage aligns with your overall financial picture.
Q: Do you have any tips for homeowners considering a reverse mortgage but wondering how to broach the subject with loved ones?
A: I advise my clients who are considering a reverse mortgage to have an honest and open conversation with their loved ones. Discussing your overall financial situation – including retirement income, savings, and monthly expenses – is a good starting point. I also recommend covering both your short-term and long-term goals, such as a desire to age in place, save for future healthcare costs, or consolidate other debts that are affecting your retirement comfort.
Additionally, I believe it’s helpful to directly address any concerns they might have about how a reverse mortgage could impact their inheritance, the costs involved, and the alternative options you’re considering. By being transparent and involving your family in these discussions, you can ensure that everyone understands the benefits and implications, helping you make the best decision for your financial future.
Q: What should family members know about the reverse mortgage loan program?
A: There are many different consumer protections built into the reverse mortgage program, however, I think the primary feature that your loved ones should understand is that it is a non-recourse loan. This means that you, or your heirs, will never owe the lender more than what your property is worth at the time it’s sold to repay the loan.
It’s also important for you and your family to be aware of the specific responsibilities you have as a borrower while the reverse mortgage is in place, as with any mortgage. This includes occupying the property as your primary residence, paying your property taxes, homeowners insurance, and any HOA dues if applicable, and maintaining the property.
Another important detail to make loved ones aware of is that, as long as you (or a co-borrower or eligible non-borrowing spouse) continue meeting the responsibilities we just covered and living in the home as a principal residence, no monthly mortgage payments are required toward the balance.1 However, if you sell the home, move out, or pass away, the reverse mortgage balance must be repaid in full. The good news is there are different repayment options available to your heirs depending on their needs and goals.
Q: What are the repayment options?
A: When it comes to repayment options for a reverse mortgage, it’s important to know what to expect. Once the final borrower or eligible non-borrowing spouse passes away, any heirs will inherit the property. At that point, if they would like to keep the home, they will need to either pay off the full loan balance or 95% of the home’s appraised value, whichever is less.
If your heirs don’t have the financial resources to pay off the reverse mortgage, they might need to sell the home. From the sale, they would pay off the existing reverse mortgage balance, and any remaining equity would go to them. Another option is for them to repay the reverse mortgage through a traditional mortgage of their own. Alternatively, they can surrender the home to the lender by providing a deed in lieu of foreclosure. By signing this document, you legally transfer the title and ownership of the home to the lender.
It’s always a good idea to discuss all the repayment options with your family well in advance so everyone is clear on what to expect and can plan accordingly for the future.
Q: In your experience, what do most of your borrowers (or heirs you speak with) plan to do at the time of repayment?
A: In my experience, most heirs choose to sell the home when it’s time to repay a reverse mortgage. They typically list the home with a real estate agent, use the proceeds from the sale to pay off the existing reverse mortgage loan balance, and then keep any remaining equity.
Some heirs consider refinancing the existing reverse mortgage balance, but this involves qualifying for a new loan to pay off the reverse mortgage. For some, qualifying for a mortgage can be challenging. Again, discussing these options with your family ahead of time can help make sure everyone is prepared and understands the best course of action.
Q: What about an inheritance?
A: When it comes to an inheritance for your heirs, they can inherit a home with a reverse mortgage, but they will need to settle the debt using one of the repayment methods we discussed. For borrowers whose heirs don’t have a strong attachment to the home, a reverse mortgage can help preserve other assets for them, like retirement portfolios. Instead of selling investments to supplement your income, you can use proceeds from your reverse mortgage to cover monthly bills or unexpected expenses. This way, if you have financial assets in addition to your home, a reverse mortgage can help preserve liquid assets for your estate – an outcome many heirs prefer. Like I said, I always encourage my clients to talk with their loved ones ahead of time, including their own hopes and desires for the future, before making any decisions.
Thank you, Andrew, for sharing your insights and providing valuable information about involving loved ones in the reverse mortgage process!
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If you’re interested in learning more about reverse mortgages and to find out if you qualify, contact our team today. Our reverse mortgage consultants will get to know you and your financial situation to help you determine whether a reverse mortgage is the right fit for you. Empower your financial journey – reach out to Longbridge Financial now to make informed decisions about unlocking the Power of Home®️.
