Reverse Mortgages May Pose Problems for Heirs
February 28, 2020
For older Americans on a fixed income, a reverse mortgage may initially seem to be an ideal way to convert home equity into immediate cash without having to pay monthly mortgage payments. While this can be beneficial for some individuals, it is not ideal for many. Scams targeting seniors, combined with confusion about the reverse mortgage process, can make it difficult to navigate the process. For these reasons, it makes sense to consult an experienced elder law attorney before making any major financial decisions involving your home.
What is a Reverse Mortgage?
Reverse mortgages are loans that enable adults over the age of 62 to transform any equity tied up in their home into cash income. The lender makes payments to the homeowner, rolling the interest of the loan into the balance so the borrower does not have to pay anything up front. Over time, the homeowner’s equity decreases while their debt increases. The home becomes collateral for the loan. If the homeowner dies or moves, proceeds from the sale of their home goes to the lender to pay off mortgage principal, interest, fees, and insurance. If anything is left over, it goes to the homeowner if they are still alive or to their heirs.
One company is trying to change the negative perception of reverse mortgages and reach a new group of seniors who may not have otherwise considered this option. Finance of America Reverse (FAR) recently launched its HomeSafe advertising campaign, using interviews from real customers to attract affluent baby boomers to their line of reverse mortgage products.
These are men and women who have most of their wealth tied up in their homes, a fact FAR is hoping to capitalize on with HomeSafe. Yet, while reverse mortgage consumers may find benefits to living mortgage-free, their heirs often face considerable obstacles keeping these family homes or selling them once their loved one has passed away.
Challenges for Heirs Dealing with Reverse Mortgages
Heirs who want to keep the home in the family after their loved one has passed may find the process especially challenging for several reasons including:
- Predatory lending practices may take advantage of consumers who were not ideal candidates for a reverse mortgage
- Faulty loan administration can create errors with disbursements and interest calculations
- Lack of transparent communication with borrowers and/or heirs about the reverse mortgage process
Upon a loved one’s passing, many heirs are shocked to find a lien on their home or even a foreclosure already in progress. It can take some time investigating to find out what went wrong and how to proceed. An attorney who is experienced in elder law matters can help.
Westchester Elder Law Attorneys at Korsinsky & Klein, LLP Help Clients Facing Reverse Mortgage Complications
A reverse mortgage may be a good idea for many older men and women. Yet, because there are countless lenders looking to prey upon vulnerable seniors, the Westchester elder law attorneys at Korsinsky & Klein, LLP advise clients to proceed with caution. We understand your concerns about how your decisions will impact your loved ones and can help you make the right choices for you and your family. Call us at 212-495-8133 or contact us online for an initial consultation today. Located in Brooklyn, Manhattan and Lakewood, New Jersey, we serve clients throughout Manhattan, Long Island, and Westchester, New York.