NLIC.org

Alex Said:

With a reverse mortgage if owner stays in house and ends up with excessive equity does lender go after estate?

We Answered:

Reverse mortgages are tricky and prone to lots of misinformation. But do not worry in this case. First, the bank doesn't own the house so they don't get to sell it. The heirs have a year to refinance or sell.

If the proceeds are not enough to satisfy the loan, the lender (or their insurance on the loan) absorbs the difference. This is a "non recourse rule" which entitles the lender to only the market value of the home and nothing more.

The other assets are safe.

Michelle Said:

How does a lender benefit from reverse mortgage?

We Answered:

my peer is correct. YOU seem befuddled about reverse
mortgages. They are not much different from regular ones.
money is lent, collateral is put up and the lender earns
interest.

IN this case, during the history of the loan, the borrower
gets money. EVERY month. AT the conclusion of the
history of the loan--when the mortgage payments are due
to cease, the home owner [whomever that is at the time]
re-finances the home or sells it to pay off the lender.

A reverse mortgage can be from near nothing [4%] of the valule of the home
to 100%, it is all negotiable.