Reverse Mortgages, Part IV - Estate Planning
In the area of estate planning there are some options. If you are healthy enough and can either buy extra life insurance or increase your existing policy; increase it to at least what your home is valued at during the loan close process. If you are not healthy, cannot afford more insurance, or simply cannot get insurance due to your age, do not fret, there are other options.
In the even that your home is worth MORE than the reverse mortgage is, your heirs have the option to refinance into a traditional loan and keep the house, or sell the house and keep the extra money. If your house is worth LESS than the reverse mortgage, your heirs have no obligation to the bank. The bank will simply sell your home for whatever they can get for it, but if the heirs want to keep the house, they may also refinance into a traditional loan.
In the case of your home being worth less than the HECM, some research should be done, if the economy and the housing market is on the rise, get an independent appraisal. If that shows there are comprable-priced homes, and the price has risen…but your HECM is still higher, there might be some questionable practices going on, and it’s time to go back to the numbers. Rest assured, in July 2008, Congress signed into law preventing predatory practices. If you feel that you have been a victim of predatory practices, contact your bank or a local authority.
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