There are several reasons why an individual or a couple might be interested in looking into reverse mortgages. Probably the most appealing aspect of a California reverse mortgage is that these arrangements can help eliminate difficult to manage monthly bills.
Getting rid of bills sounds great, and it is a workable and beneficial process for some people. However, California reverse mortgages also have the ability to impact your will or trust. To learn more about how reverse mortgages work and how they could affect your estate plan, speak with a knowledgeable California estate planning attorney so that you don’t unintentionally affect your loved one’s inheritance.
What is a Reverse Mortgage and How is it Done?
When you buy a home, you will typically take out a mortgage which is a long-term loan that you pay in monthly installments. The monthly payments are made up of the principal cost of the property as well as the interest for the loan. Most mortgages are for a 30-year term although some individuals prefer a 15-year loan. The loan you choose will be based on your income and how much you can afford to pay each month.
When you do a reverse mortgage, instead of the borrower making monthly payments to the lender, the opposite happens. The lender will pay the borrower money each month. This arrangement gives the borrower the ability to increase their cash flow every month to help them with their expenses. Just like how a mortgage loan that you pay each month is secured by the property you are buying, the reverse mortgage loan that pays you each month is also secured by your property.
A reverse mortgage loan is still a loan. That means it must be repaid. Payments on the reverse mortgage will not need to be made until the borrower dies or the borrower moves from their home. For most families, the home that was used to make the reverse mortgage must be sold in order to pay the lender any balance left from the loan. It is quite common for a spouse to do a reverse mortgage and not tell their partner or for a couple to do a reverse mortgage without telling their family. These actions are not done out of malice, but rather done innocently. Many individuals and couples are unaware of how a reverse mortgage can impact the inheritance they plan to pass on to their loved ones. For instance, if your child believes that they will inherit your home when you die, but because of your reverse mortgage your home must be sold to pay the loan off, this can be a very upsetting shock.
Speak with a Los Angeles Estate Planning Attorney Today
It is best to inform your loved ones of your plans to do a California reverse mortgage so there are no surprises after you pass on. To learn more about how a reverse mortgage could affect your estate plan, please call the Los Angeles estate planning attorney Marlene Leiva at 818-519-4465 to schedule your free consultation.