What are sale op­tions with a re­verse mort­gage?

Sun Sentinel Palm Beach Edition - - MONEY - Gary Singer

Q: I have a re­verse mort­gage on my home. Am I al­lowed to sell my prop­erty to pay off the re­verse mort­gage and keep my eq­uity or do the lenders just get the whole thing? If I die, can my son sell the prop­erty and keep any eq­uity? — Don­ald

A: A re­verse mort­gage is dif­fer­ent from a typ­i­cal mort­gage be­cause you do not need to make monthly pay­ments. In­stead, the bal­ance you owe the bank grows each month. The bank is re­paid only un­der cer­tain cir­cum­stances, such as your death or if you move to another home.

How­ever, if your home is worth more than the mort­gage bal­ance, that ex­tra amount, known as your eq­uity, be­longs to you or your heirs. If the bal­ance tips the other way and the loan is more than your home’s value, you or your heirs will have to turn over the house, but will not be re­spon­si­ble for any ex­tra.

You can sell your home now and keep the eq­uity, if you want. If you die, your son, pro­vided he is also your heir, will have a cer­tain amount of time, typ­i­cally 12 months, to repay the loan in full, usu­ally by sell­ing the home.

If you are con­cerned about the bal­ance of the mort­gage and want to make sure there is eq­uity for your heirs, there is noth­ing stop­ping you from mak­ing par­tial pay­ments while you are alive.

Re­verse mort­gages are not for ev­ery­one, but can be a use­ful tool in the right sit­u­a­tion. If you want to con­tinue liv­ing in your home with min­i­mal monthly pay­ments, per­haps due to your re­tire­ment, a re­verse mort­gage may be right for you.

Be aware that they tend to have sig­nif­i­cant up­front costs; it does not usu­ally make sense un­less you plan to stay in your home for the long term. Also, re­mem­ber that while you do not have to make monthly mort­gage pay­ments, you are still re­spon­si­ble for pay­ing your as­so­ci­a­tion dues, prop­erty taxes and home­owner’s in­sur­ance.

Board-cer­ti­fied real es­tate lawyer Gary M. Singer writes about in­dus­try le­gal matters and the hous­ing mar­ket at Sun­Sen­tinel.com/ real-es­tate each week. To ask him a question, email him at [email protected]­law.com, or go to Sun­Sen­tinel.com/askpro.

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