Question: My parents have owned their Glendale home for more than 20 years. They own their home free and clear. My parents now want to get a reverse mortgage on their home to get monthly payments from the mortgage lender in order to supplement their Social Security income. Upon their death, they want my brother and me to inherit the home. If my parents get a reverse mortgage, will my parents still own the home?
Answer: Yes. Reverse-mortgage financing is no different from any other financing of a home in that the borrower continues to own the home. Upon the death of your parents, you and your brother can pay off the reverse mortgage and retain title to the home. If the reverse mortgage is not paid off, however, the reverse-mortgage lender can foreclose and take title to the home.
There are two major differences between a reverse mortgage and other mortgage financing. First, no payments are made to the mortgage lender during the borrower’s lifetime. Second, the balance owed under a reverse mortgage increases, rather than decreases, during the term of the reverse mortgage.
Reverse mortgages should be considered by senior citizens who own their homes free and clear (or have a small balance owed on the mortgage loan). The reverse mortgage either can be one large payment from the mortgage lender or monthly payments from the mortgage lender.