Senior citizens seem to be inundated these days with ads for reverse mortgages. Many TV ads feature actors trusted by older people. While reverse mortgages can provide seniors with needed income, they also have disadvantages. Even if you avoid the reverse mortgage scams and sign on with a legitimate lender, you or your heirs could end up with debt you never intended.
One Florida woman says that she and her sisters went through a nightmare, including a court battle to get back their father’s home back. She says that when she saw the fees her father was paying on his reverse mortgage, she tried to get him to pay it off. However, he passed away before he could.
According to court documents, when he took out the loan, the man received $400,000 to pay off his mortgage and an additional $26,000 in cash. However, when he passed away in 2016, he owed the lender over $718,000. That was almost double what the house was valued at. The woman says that they didn’t want to live in the home. However, they felt compelled to “fight for what is rightfully Daddy’s.”
Often, heirs don’t even realize that there’s a reverse mortgage on their parents’ or other loved one’s home until after they’re gone. Many people get a reverse mortgage assuming that there will be plenty of equity left in it for their heirs. However, even if the loan is only for part of the equity in the home, interest and fees add up. Often, as in the case described here, heirs end up owing the lender money. They may have to watch the home they grew up in go into foreclosure.
If you or a loved one has a reverse mortgage, it’s essential to keep track of how much money is owed the lender so that no one is in for any unpleasant surprises. Your attorney can also offer advice on how to deal with a home on which there’s a reverse mortgage in your estate plan.