Chicago Tribune: Reverse Mortgage Buy-Back Advice for Heirs

A daughter looking to pay off her mother’s reverse mortgage should take advantage of record low mortgage rates and buy the home before her mother dies, a Chicago Tribune columnist recommends.

The borrower’s daughter sought answers about staying in her mother’s home, which has a reverse mortgage, and paying off the loan over a period of time. This raised an interesting question, says the Tribune, because most reverse mortgage lenders are not positioned to take multiple or even monthly payments for these loans.

Instead of waiting to pay off the loan once the reverse mortgage borrower passes away, says the columnist, the daughter should consider “buying” the home from her mother now, before more interest accrues on the loan.

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Because mortgage loan interest rates are so low, with 30-year mortgages available for just over 4%, and some 15-year loans for less than 3.5%, it would make sense to take one out and buy the home, allowing the mother to pay off the reverse mortgage that’s accruing interest at a higher rate.

Doing that, says the Chicago Tribune, would put her “way ahead of the game.”

Read the full article here.

Written by Alyssa Gerace

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  • The original question was:  “Will we have to get a new mortgage to pay off the reverse mortgage if mom dies before I am 62?”  The author circled around it but never answered the question by clearly stating that a most reverse mortgages generally cannot be assumed and cannot add borrowers. 
     
    The author seemed totally uncomfortable.  She did not seem to know that if one spouse is not yet 62, only one spouse would be on title; her presentation certainly did not provide any warning in that regard.  It would have been helpful if financial information had been presented such as the type of reverse mortgage, the current amount due, the value of the home, the margin and index if an adjustable rate along with the amount available through the credit line, if any, the information about any possible term or tenure payouts, and the present principal limit.
     
    While the author explored forward loan options in “buying” the home from the mother, she failed to discuss selling expenses (should be low), any impact on property taxes due to a sale, if any, possible income tax liability for the mother due to the sale, or the impact of the payoff of the loan on the deductibility of the accrued interest.  She also never explains why she surrounds the word, “buying,” with quotation marks.  It seemed she has a background in forward mortgages but little in real estate to have ignored the possible ramifications from a sale.
     
    The author ignores how title can be revamped without disturbing the reverse mortgage.  She fails to discuss the options and opportunities which the reverse mortgage provides.
     
    With the level of knowledge this author has on reverse mortgages either she should have done adequate research or passed it on to someone who would.  All in all some rather poor advice.

  • “most reverse mortgage lenders are not positioned to take multiple or even monthly payments for these loans.”

    Interesting…I know of no lender that is NOT able to accept partial payments on a HECM.  Can anyone provide any examples of this?

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