Question by Donna Lu: Paying off reverse mortgage?
My father took out a reverse mortgage several years before he died, my mother lives in the home. With the real estate market as it is now, the value of the home is probably not much more than the balance on the reverse mortgage.
My brother and I have cared for my mother for 6 years so far, and when she leaves the home, we do not want to have to come up with any additional funds if the place sells short.
Can we just sign it over to the lender so we don’t have to deal with the whole thing?
We are not concerned with financial gain from any inheritance, but neither of us are in a position to pay off this mortgage, or make up the difference.

Best answer:

Answer by Lauren F
The only way I would recommend prepaying a reverse mortgage is if your mom is very low income and is going to move into a subsidized senior apartment complex. In that case, it might be a good idea. Otherwise, I wouldn’t recommend it. For one thing, where will your mother live if you sign it over? Are you or your brother prepared to take her in or pay for an apartment?

For most reverse mortgages, the heaviest expense was upfront in the financing fees. You won’t get that back if you pay it off soon. If she passes away and the house value barely covers the reverse mortgage, then any assets she has in her estate can be used to pay it off, and if those aren’t enough, then that is the bank’s problem and the risk they took in giving your father the loan. You won’t be responsible for the shortfall.

It’s nice that you are helping your mother. But, her debts are not your responsibility to cover when she dies. It will come from her estate.

There are some specialists in elder law and reverse attorneys you may want to talk with for the specifics. Try this website for a referral www.benefitscheckup.org. Or, you may also want to contact the AARP and ask them for a legal aid referral.

Good luck.

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