when I die, what happens? do my children still have any rights to the property?
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4 Responses to 'with a reverse mortgage, what happens to the equity of my home?'
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No, you have given your home to the bank.
Yes they do, but on the reverse mortgage, you are using your equity. If the house prices go down, they will have even less equity.
it is a calculated risk by a bank.
In theory, the homeowner is collecting equity payments from a bank.
The bank gives these reverse mortgages to senior citizens who are homeowners. In many cases, the seniors own the houses outright. So, the bank is willing to pay a senior citizen, $2,000 per month (or more). The bank is counting on the senior to die within 20 years. In essence, the bank pays out a maximum total of $480 thousand, for a house that ends up having a value of $1,000,000 or more. It is a sweet deal for banks. The heirs of the seniors are the ones who get the shaft.
There are lot of misconceptions about reverse mortgages, and these responses prove it.
When the homeowner dies in a reverse mortgage situation, the heirs have the option to pay off the note and acquire the property, or sell the property at fair market value and recoup the amount of the sale above the payoff. In no case are the heirs or the estate liable for any reduction in property value. The financier assumes all of that risk. As such, the heirs have full right to remaining equity in the property.