I was walking around Laguna Woods the other day after visiting with my parents when I ran into an old friend whose own parents live just a few doors down from mine. We got to chatting and he told me his parents were thinking about taking out a reverse mortgage on their home so they could spend the next few years traveling.
As someone who also stands to inherit a home someday from my parents, I felt it was my duty to warn him that there are risks involved. If his parents don’t plan carefully, he could end up inheriting a pile of foreclosure notices along with the house. And if you’ve recently inherited a home with a reverse mortgage that you can’t afford to pay back, you might be feeling stuck and out of options.
Wait… What the Heck Is a Reverse Mortgage?
A lot of people have heard the term before (or seen the commercials on tv) but still don’t know exactly how a reverse mortgage works. In a nutshell, it’s a type of loan offered to homeowners who are 62 years old or older that allows them access to their home equity with no monthly payments.
The borrower is still responsible for property taxes and insurance payments, but they can defer repayment of the loan until they die or move out of the house. Once either of those things happens, however, the bank will want their money. So if you were named as the sole heir on that Laguna Woods home that your mother or father had a reverse mortgage on, guess who’s on the hook for all that money? Yup – YOU.
So You’re Saying I Could Inherit a Huge Debt?
Yep, that’s exactly what I’m saying. Here’s the deal:
The Consumer Finance Protection Bureau (CFPB) released a report in February of 2015 highlighting the top complaints regarding reverse mortgages. Consumers are frustrated with their loan terms, service runarounds, and foreclosure problems. And here’s the interesting thing: Reverse mortgages are only available to people 62 or older, and the CFPB’s report covers 1,200 reverse mortgage complaints through December 2011 and December 2014. But of those 1,200, only 42% were from people 62 or older… which means the remaining 58% were likely from the younger spouses or family members of borrowers who ended up inheriting that burden.
Under federal rules, survivors are supposed to be offered the option to settle the borrowed loan for a percentage of the full amount. But the problem we’re seeing is that reverse mortgage companies are threatening heirs with foreclosure unless they repay the loan in full. Since the interest rate and fees on a reverse mortgage may be higher than regular home equity loans, and since heirs are still responsible for property taxes, insurance, and maintenance, many of them find themselves unable to pay these costs. And that means many of them ending up losing the house, which is often as much of an emotional blow as it is a financial blow.
How Sell Your House Direct Can Help
We know this is a hard situation to be in and the last thing we want is for anyone to get so far underwater with mounting debt that they can never come up for breath. Sell Your House Direct is there to help people just like you. We will purchase your home for cash so you can settle up with the bank and hopefully have some funds left over to keep for yourself. And we can do all that in less than a week. If you decide to go on the market, you could be waiting for a long time to close a deal, and paying property taxes and insurance costs all the while. Let us make you an offer and help close this chapter with a happy ending. Contact us today.Views: 15