Impact of Reverse Mortgage on the Kids Inheritance

On the surface, a reverse mortgage is surely not the best usage of home equity, especially for families that have children with resources. The fees are high, although they are coming down and the erosion of equity is not that sweet of a deal. However, the loan is not all bad as those that do utilize it often do so to their reward. A reverse mortgage is kind of like a medication that is taken to “cure” one illness that may bring on other side effects. If those effects are reasonable then why not go for it? Well when considering side effects of a reverse mortgage, consider how it may affect one’s heirs. A great posting on the topic by law firm Bacon and Wilson below:

If you’re like most retired people, the single largest asset you have is your home. Since it may be paid for or possibly subject to a small home equity loan, there is significant equity there that could be used for living expenses, including luxuries such as vacations, a new car, or for necessities, such as a new roof, medical expenses, etc.

In any event, there are some people who are dead-set against encumbering their home because they’ve worked hard to pay off their mortgage. They may even have made double payments or paid additional principal on the home mortgage while they were working in order to pay it off sooner. There is something to be said for this, as some people have more security in having their mortgage paid off in retirement. However, a reverse mortgage may be a good option under certain circumstances. Full Story

Written by charles dennis on June 21st, 2007 with comments disabled.
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