Ask Kim


Underwater on a Reverse Mortgage?

Kimberly Lankford

You probably won't owe more than the value of the house when the loan is due.



My aunt, who lives in Las Vegas, has a reverse mortgage that she took out in 2006, when her home was valued at more than $250,000. The home is now worth just $85,000. If she dies while the home’s value is still so low, can the bank take money from her estate to cover its loss? --B.O., Yorba Linda, Cal.

SEE ALSO: Reverse Mortgages -- Risky for Boomers?

If your aunt’s reverse mortgage is a home equity conversion mortgage, as most of them are, she doesn’t have to worry. "HECMs are nonrecourse loans, meaning that the borrower will never owe more than the value of the house when the loan is due, which is either when the owner moves out, sells or passes on," says Peter Bell, CEO of the National Reverse Mortgage Lenders Association. The Federal Housing Administration reimburses the lender for the difference between the home’s value and the cost of the loan, which is why borrowers have to buy mortgage insurance.

Check the loan documents or second deed to verify that it is a non-recourse loan. For more information on reverse mortgages, go to www.hud.gov.

Got a question? Ask Kim at askkim@kiplinger.com.



Editor's Picks From Kiplinger


You can get valuable updates like Ask Kim from Kiplinger sent directly to your e-mail. Simply enter your e-mail address and click "sign up."

More Sponsored Links


DISCUSS

Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy


Advertisement

Market Update

Advertisement

Featured Videos From Kiplinger