No. of Recommendations: 9
The average term of a reverse mortgage is about seven years, and if a family member is not willing or able to repay the loan, lenders push the property through foreclosure.

It may be a terrible idea, but is it fraud? Someone took out a loan using the home as collateral, then upon their death the loan isn't paid back. So, either the people in the will need to pay off the rest of the loan or the collateral gets sold to cover the balance.


And this isn't really any different than if they had a standard mortgage on the house when they died. The fact that there is a loan for which the house is collateral, whether that is a reverse mortgage or a standard mortgage, means that upon that person's death or the sale of the house, the loan must be repaid. I don't see where a family member needs to be able or willing to repay the loan unless they want the house, and that is no different with a reverse mortgage as with a regular mortgage. Same thing would happen if there were a Medicaid lien on the house or a tax lien - those things need to be paid if the family or heirs wish to keep the house, or the house gets sold to pay those obligations off.

The fact that the reverse mortgage will need to be paid back upon the owner's death does not make the reverse mortgage bad or evil. There are lots of reasons why a reverse mortgage can be bad, but having to pay back the loan is not one of them in my mind.
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.