Reverse Mortgages and Your Estate Plan
By now, you have heard the young people complaining about how the only way to be able to afford to buy a house is to have rich parents. Even though homeownership has long been considered the hallmark of financial stability, not everyone whose name is on the title to a house feels financially secure. Some of the households with six-figure incomes that live paycheck to paycheck spend a big part of their paycheck on rent, but others spend an equal amount on a mortgage payment. Even millionaires don’t feel rich. Sure, their house is worth a lot, but it is so difficult to sell it in today’s market that they should just concentrate on losing their family’s last chance at generational wealth. You truly have it made, though, if you own a house with a paid off mortgage, but if you are in that situation, you are either old or a money launderer. With regard to your estate plan, your house could be a valuable heritable asset, or it could be a source of cash to spend, but can it be both? To brainstorm about how your humble abode can help you feel rich, instead of just looking rich on paper, contact a Washington, D.C. estate planning lawyer.
Reverse Mortgages Can Provide Seniors With Spending Money
The most common way to use your home as a means to borrow money is to take out a home equity line of credit (HELOC). A HELOC is like a credit card, except that, because you have secured it with your house, the interest rates are lower and the credit limit is higher. You can take out a HELOC before you have paid off your mortgage. Most HELOC customers are in the workforce, and an unexpected job loss can leave them struggling to pay both the mortgage and the HELOC debt.
By contrast, the target audience for reverse mortgages is seniors who have paid off their home mortgage loans. A reverse mortgage gives you the loan money as a lump sum, and it is not due for repayment until the borrower dies or sells the house.
How Risky Are Reverse Mortgages?
Reverse mortgages are great if you were eventually planning to sell your house and move to an assisted living facility. Especially if you have long-term care insurance, you could be flush with cash even after repaying the reverse mortgage. Reverse mortgages are riskier, though, if your plan was for your children to inherit your house after you die. Your estate will need to repay the reverse mortgage. This is not a problem if most of the loan money is still sitting in your bank account or if you die without any other debts. If you have other debts, though, then there is a risk that the personal representative of your estate will have to sell your house before your estate can settle.
Contact Tobin O’Connor Ewing About Reverse Mortgages
A Washington, D.C. estate planning attorney can help you decide whether to borrow a reverse mortgage. Contact Tobin, O’Connor, and Ewing in Washington, D.C. or call 202-362-5900.
Source:
marketwatch.com/guides/home-equity/heloc-vs-reverse-mortgage/#:~:text=HELOCs%20are%20like%20a%20credit,the%20equity%20in%20your%20home.