Will Mom and Dad use up my inheritance?
The value of your parents’ home might increase as a result of tapping into its value, which may result in some equity remaining at the end of the loan. Your parents may be able to use the remaining equity in their house. Consider the possibility that they could live more comfortably without having to rely on family for assistance.
Will the bank take their home? As long as your parents continue to meet loan guidelines, they will keep living in the home. The owner must, however, keep their property taxes current, maintain homeowner’s insurance, and keep the house in good repair. The loan could become due and payable if you fail to do these things. Your parents will continue to own their home and retain title as long as they follow the loan guidelines and requirements, just like a traditional mortgage borrower.
How much money will they owe when the loan has to be repaid? Your parents will owe the total amount borrowed (up to the value of the home), accrued mortgage insurance premiums, accumulated interest, servicing fees, and any other costs and fees financed through the loan amount.
How do my parents repay the loan? There are three viable options for your parents. They can sell their home to repay the lender and collect any leftover proceeds, choose to reimburse the lender directly from a personal account, or refinance the loan.
What happens to the equity if my parents or I decide to repay the loan by selling the house? Your parents can choose from three options. To repay the lender, they can sell their home and collect any leftover proceeds, choose to repay the lender directly from their personal accounts, or refinance the loan.
What happens to my mom and dad’s house if they move into a senior care facility? As soon as the last borrower moves out of his or her home permanently, the reverse mortgage becomes due and payable. If you move into a nursing home, sell your house, pass away, or move in with your children.
What happens if the loan balance becomes greater than the value of the home? As a non-recourse loan, the Home Equity Conversion Mortgage (HECM) is secured by only the home and the property. As HECM borrowers, your parents are responsible for paying mortgage insurance premiums to the Department of Housing and Urban Development (HUD). This insurance protects the borrower in that they will not be responsible for more than the value of their home when the loan becomes due and payable. Heirs wishing to retain the home after the loan becomes due may choose to pay the lesser of the (1) loan balance or, (2) 95% of the home’s appraised value, less any closing costs and real estate commissions.
What are the risks my parents would be taking in receiving a reverse mortgage? A reverse mortgage typically doesn’t affect regular Social Security or Medicare benefits. To find out if it impacts other federal or state assistance or medical programs, contact your reverse mortgage lender, tax attorney, or counseling agency. A reverse mortgage loan is secured by a mortgage on the home and failure to comply with loan terms could result in foreclosure. All risks should be identified and discussed with your own attorney and/or financial advisor.
Are there restrictions on how my parents spend their money? Your parents can spend their money any way they choose. Borrowers have often used their reverse mortgage to pay off other debts, make home improvements, go on vacations, replace an aging vehicle, or eliminate an existing mortgage payment (the existing mortgage debt is refinanced into the reverse mortgage loan and your parents must continue paying their property taxes current, applicable HOA fees, and keep the home in good repair).
Is there any information that provides what all of the fees will be? The lender is required to provide your parents with the Total Annual Loan Cost, or “TALC” disclosure, which is required by the Federal Reserve Board. The TALC displays the total transaction costs over the projected life of the loan, which will allow your parents to see all costs related to the reverse mortgage.
This material is not provided by, nor was it approved by the Department of Housing & Urban Development (HUD) or by the Federal Housing Administration (FHA). It is not intended to be a substitute for legal, tax or financial advice. Consult with a qualified attorney, accountant or financial advisor for additional legal or tax advice.
*There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower(s) must continue to pay for property taxes and insurance and maintain the property to meet HUD standards or risk default. Credit is subject to age, minimum income guidelines, credit history, and property qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.
Kevan Green
C2 Reverse Mortgage Professional
NMLS #256908 | BRE #01140535
This licensee is performing acts for which a real estate license is required. C2 Financial Corporation is licensed by the California Bureau of Real Estate, Broker BRE #01140535 | NMLS #256908 Loan approval is not guaranteed and is subject to lender review of information. Loan is only approved when lender has issued approval in writing. Specified rates may not be available for all borrowers. Rate subject to change with market conditions. C2 Financial Corporation is an Equal Opportunity Mortgage Broker/Lender. The services referred to herein are not available to persons located outside the state of California.
C2 Financial Corporation is approved to originate VA loans, and has the ability to broker such loans to VA approved lenders. C2 Financial Corporation is not acting on behalf of or at the direction of HUD/FHA or the VA.
Web Design & SEO by Hozio
Kevan Green
By Clicking submit you agree by electronic signature to: