Reverse mortgages
Reverse mortgages, family and your estate
A reverse mortgage changes what is left in the home, which affects anyone who lives there and anyone who might inherit. It is worth talking that through. The decision is still yours as the homeowner.
The choice is yours
The decision is yours as the homeowner. Family may have a view, and it is worth talking it through, but the choice is yours.
Family can be helpful, and they can also put pressure on, in either direction. Lenders are told to watch for undue influence, especially where someone else gets the benefit of the money. Ask your lawyer to see you without the person who would receive the funds, if that is a concern. You do not have to go ahead to keep the peace.
A partner who is not on the loan
If your partner is a borrower, or is named as a person who can stay, they can usually remain after you move into care or die, and the loan waits until the last of you leaves. That still depends on the terms.
If your partner is not named, they do not have that position. The loan can become repayable, and staying may mean selling the home or refinancing. Sort this out before anyone signs, not afterwards. Every owner usually has to agree to the mortgage.
What is left
Interest compounding reduces the equity. If the home's value rises faster than the loan, something can still be left. If it does not, little or nothing may remain for the estate or for later care. A no negative equity guarantee, where the loan includes one and you keep to the terms, limits a shortfall. It does not save a slice of the value for the family.
Optional equity protection sets aside a percentage of the net sale proceeds. It reduces what you can borrow. It is one way to leave something, if the lender offers it and the fee and the lower limit are acceptable to you.
The decision is yours as the homeowner. Family may have a view, and it is worth talking it through, but the choice is yours.
General information only, not advice. We're a referral service and may receive a commission. If a reverse mortgage settles, the lender may pay us a referral fee.
Questions
- Should I tell my children?
- The loan affects what they might inherit and, if they live with you, where they live, so it is worth telling them. You do not need their permission if they are not owners. The decision is yours as the homeowner.
- What if a child wants me to borrow for them?
- A child asking you to borrow for them is a common kind of pressure, and you do not have to go ahead. If you are thinking about it, ask your lawyer to see you without that child in the room, and borrow only what you decide you can spare. The equity you give away is not there later.
- Does the estate have to pay a shortfall?
- If the loan includes a no negative equity guarantee and you have kept to the terms, the lender does not ask the estate for more than the net sale proceeds. If the terms were not met, that limit can fall away. Ask your lawyer to show you which clause says so.