Educate Your Heirs On Reverse Mortgages in Virginia

Reverse mortgageIf you have a reverse mortgage, let your heirs know. Soon after you die, your lender must be repaid. Heirs will need to quickly settle on a course of action.

Even when heirs inherit a home outright and with no strings attached there are many issues to consider. Family homes are unique assets. However, as assets go, family homes can be as difficult as they are meaningful. But what about when there are strings that come with inheriting the family home? What if there is still a mortgage or, increasingly common, a reverse mortgage? 

Kiplinger recently examined this topic in an article titled “What Heirs Need to Know About Reverse Mortgages.”   The key issues are timing and payoff. At the passing of the last borrower named in the reverse mortgage, that mortgage has to be paid off. Why? Because that is what a reverse mortgage does.

A regular mortgage offers money for the borrower to buy the home while a reverse mortgage offers money for the equity a borrower already has locked up into their home. To keep the house you inherit, then, you have to pay off the lender. Consequently, to earn anything from the sale there must be more equity in the home than debt incurred by the reverse mortgage.

But what if the reverse mortgage balance is greater than the value of the home? Fortunately, reverse mortgages can never force an estate into debt greater than the value of the home itself or allow the lender to collect against the estate beyond the home (they are “nonrecourse” loans).   In short: there is a very definite need to quickly determine what is to be done with the home and if it is financially feasible.

Whether as an heir or a planner, a reverse mortgage is an important financial product to understand and to plan accordingly.   When it comes to settling the estate, handling creditors is a serious responsibility and a reverse mortgage is a serious undertaking. If a reverse mortgage becomes part of the financial plan late-in-life, it also carries with it significant estate consequences that must be navigated very carefully.

You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.

Reference: Kiplinger (March 2014) “What Heirs Need to Know About Reverse Mortgages



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Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.