Much about the housing marketing has changed over the last few years, including increased regulation in the banking and loan industries. So far one type of loan, the reverse mortgage, has been relatively unaffected in that time. But changes are on the horizon for this unique lending option.
A reverse mortgage is a special type of home loan that allows homeowners to convert a portion of their home equity into cash. The equity you built up over years of making mortgage payments can be paid to you to supplement your income.
The issue was recently brought up in a Reuters article titled, “Federal clampdown looming on reverse mortgages.”
According to the Department of Housing and Urban Development, reverse mortgages are a safe plan that can help older Americans supplement Social Security, meet unexpected medical expenses, and make home improvements. Unfortunately, riskier loan structures are making reverse mortgages increasingly dangerous. In response, the federal government is planning to take a more conservative approach when evaluating new reverse mortgage loan applications. This means reverse mortgage loans will be harder to acquire in coming months.
For purposes of estate planning, the reverse mortgage is an idea worth exploring. In practice, when your home is no longer used as a primary residence, the cash, interest, and other finance charges from the reverse mortgage loan must be repaid. However, all proceeds beyond such amounts owed on the reverse mortgage belong to your spouse or estate and no debt is passed along to the estate or heirs. This makes the reverse mortgage an option to consider for older homeowners who may need supplemental income, but hope to avoid passing on debt to family members.
Seek appropriate counsel to find out if this lending option is right for you and your loved ones.
Have you or your elderly loved ones got your affairs in order by updating your Will and Trust so that your home and cash assets are protected from Medicaid and nursing home liens?
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If you have any questions or would like to schedule a consultation please call Attorney Patrick Kelleher at 781-871-PLAN (7526) or by email at Pat@myfamilylifeplan.com
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Patrick J. Kelleher is a South Shore, MA resident and estate planning attorney serving and protecting families and businesses in the South Shore, MA area. For more information on estate planning visit our firm’s website at www.MyFamilyLifePlan.com where you can check out our Blog, free Newsletter library, free Estate Planning Channel on Youtube and sign up for a Free e-Newsletter!
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This article is not intended to provide legal or tax advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
Reference: Reuters (December 5, 2012) “Federal clampdown looming on reverse mortgages”