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The reverse mortgage is a very common type of loan among retirees. This type of mortgage provides senior citizens with a way to create a regular source of income for themselves. While it is beneficial, it can have an impact on inheritance.
Tapping Equity
With the reverse mortgage, you have to be 62 years old and have a house that is paid off or nearly paid off. The loan is basically a way for a lender to pay the homeowner for their equity. Essentially, it is very similar to a home-equity loan or a refinance. The difference is that the homeowner will not have to make any payments to repay the debt. The lender will only be repaid if the property is sold or when the homeowner dies.
Impact on Inheritance
Homeowners are allowed to live in the property as long as they want even after they stop receiving payments. However, they still owe the lender the amount of money that they borrowed. If you die, your beneficiaries might receive something from a life insurance settlement. At this point, your beneficiaries going to have to decide whether they want to your lender with funds from the life insurance settlement or sell your house.
