Reverse Mortgage: What Happens If Your Home’s Value is Lower Than What You Owe

a houseIf the loan balance of my reverse mortgage program loan is higher than my house’s value due to my house’s value significantly dropping, what should I do? Also, my children are planning on keeping the house when I die. Would they need to pay off the entire balance of my reverse mortgage loan even if it is substantially higher than my home’s market value?

The Answer…

It would mainly be dependent on your specific kind of revere mortgage. The FHA or Federal Housing Administration insures the majority of reverse mortgage loans these days as part of the HECM or Home Equity Conversion Mortgage program. Loans under this program are non-recourse, which means that if your house would be sold to pay off your reverse mortgage, neither you nor your children would be required to repay more than your home’s sales price. Your insurance would setter any deficit, provided that your house sells for 95% at the least of its current market value.

If your children are looking to keep your house either when you permanently move out or pass away rather than selling it, then they would need to repay your reverse mortgage. However, they won’t need to repay more than what your house is worth. If your balance is higher than the worth of your house, they would only need to pay 95% of your house’s current market value and FHA insurance would take care of the rest.

On the other hand, if what you owe were less than your home’s worth, your children would only need to settle the balance. Your children could repay the required 95% in cash or by taking out a standard mortgage. But they would still have to undergo the usual process for taking out a new mortgage.

Other Important Things to Note

If you are an heir to a house with a reverse mortgage loan, it’s best to discuss your circumstanced with the loan servicing company. In general, the loan servicing company would give you a couple of months to decide on what you want to do, but this period would vary from lender to lender. Just stay in touch with the lender and make sure to communicate your plans, whether you want to refinance, sell the house, or just walk away.

Property Buying and Conveyancing: Top Ways to Ensure a Safe Transaction

A portrayal of a scammer

A portrayal of a scammerScammers will hack either your email or the solicitor’s email to conduct their fraudulent activities. They start sending fake emails instructing you to divert payments from the initial accounts provided, to their accounts.

Buying a house is one of the most difficult processes you would deal with in your life. From finding a cheap or affordable solicitor to dealing with agents, you may find it stressful. Add to that the possible threat of fraud. Conveyancing scams are now listed among the most popular types of cybercrimes that can lead to extreme financial losses.

It mostly happens to first-time buyers who are not well versed in the conveyancing process. Here are some of the things you can do to protect yourself and your finances.

Do not send the entire payment at once

Even after verifying the bank accounts and payment platform with the firm, never send all the money at once. Instead, transfer small amounts first and ensure that the firm confirms receipt of the money in the right account.

Be smart with email communication

Fake email addresses are difficult to identify since their difference with the original email address is as meagre as an additional or missing number, letter or symbol. Good thing email service providers or platforms today have different security features to make sure you are not sharing or sending personal information to malicious accounts.

Get the solicitor’s name and contact number

Get the number of a staff member or the receptionist so you can contact the firm directly. In that case, work with solicitors who have strong security measures, and whose employees are willing to verify information whenever necessary. If possible, go to the firm and meet your contact person.

You should avoid becoming a victim of any fraudulent activity at all cost. Do not trust anything that pops up in your inbox. Instead, call a reliable solicitor or conveyancer and talk to them in person so you can ensure a smooth, safe and successful transaction.