“Back in 2010, our father took out a reverse mortgage, gaining an income of $1,000/mo. Now 2023, Dad has left us, while our mother, now 93, is still in the home. The adjustable-rate mortgage has swelled to $360,000. The interest keeps climbing with inflation. None of us can afford to settle the outstanding balance, meaning it will continue to skyrocket. When our mom passes away, the entire amount will come due. Do you have any recommendations?”
As this person has discovered, reverse mortgages can be a double-edged sword, providing short-term income but long-term challenges. If their mom passes away or moves out permanently, the loan will become due. If there’s still equity in the home, they MAY be able to refinance it, then taking on the entire debt as a new loan. They can also opt to sell the home, paying off the underlying balance, and they can sell at any time to avoid the time crunch that might occur when their mom passes. If there’s no equity left, the heirs can simply turn the house over to the lender. They won’t be on the hook if the mortgage balance is greater than what the home is worth.
If you have parents with a reverse mortgage, please discuss these options with the lender holding the mortgage. Contact me if you need a lender you can talk with about refinancing. You don’t need to use the reverse mortgage holder for the refinance. ~Valerie