HOME WITH A REVERSE MORTGAGE DOES NOT MAKE THE “WORST ASSETS” LIST
An article you read lately has caused you to rethink your estate plan, which was originally conceived before your wife passed away. What first captured your attention was the Kiplinger article about what assets to leave for one’s heirs. “Let’s face it,” Elaine Silvestrini and David Rodeck point out in Kiplinger, “Certain inheritances can be a tremendous burden on your loved ones.”
Once you began reading more on the subject, you became even more concerned. While timeshares seem to make everyone’s worst-assets-to-inherit list, houses are also listed as problematic, if they require extensive repairs or have large mortgages. “In many cases, beneficiaries assume they can simply sell the property and pocket the proceeds – but when the mortgage balance, property taxes, repairs, or liens exceed the home’s value, there is often little or nothing left after closing”.
The Plan You Don’t Want to Change
One decision which you’d originally made while your spouse was still alive is one you have no intention of changing, spending the rest of your life in this very home. There is no longer a mortgage, but the place is going to need some repairs and relatively minor alterations to accommodate you as you age. (You’d held off so far, no wanting to go into debt or disturb your investments at an uncertain political time.) Now, reading those articles has started you questioning your plan. While neither of your sons is likely t
o want to live in the house, you don’t want to leave them with problems settling your estate after your death.
Using Home Equity Without Monthly Mortgage Payments*
Rather than liquidating investments or taking out a second mortgage, you might consider accessing your home equity in a different way—through a reverse mortgage. By using an FHAinsured HECM Adjustable Rate line of credit, you could draw only the funds needed to complete the renovations. You would continue to pay property taxes and homeowners insurance (based on the newly appraised value), but no monthly mortgage payment is required*. Any unused portion of the available credit grows over time at the same rate being charged on borrowed funds—and that growth is nontaxable.
What Your Heirs Can Expect
When the time comes, your heirs are not left with a burden. Instead, they have clear, positive choices:
- Pay off the loan balance (or, if lower, 95% of the home’s appraised value at the time)
- Sell the home, keeping any remaining equity
- Turn the property over to the lender, with no impact on their personal credit
One More Important Step: The Conversation
As you weigh your options, this article may also be helpful: New York attorney Neil V. Carbone notes that children are more likely to respect a parent’s wishes when those wishes are explained in person—even if they’re difficult to hear—rather than first learning about them from a will while grieving. A thoughtful conversation with your two sons may help clarify the best path forward.
https://mutualreverse.com/david-garrison
*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org
Equal Housing Lender