Estate planning attorneys work closely with clients to assist in the drafting of wills and other legal documents. They are often involved in the redrafting of these documents when homeowners decide to convert home equity into money to afford retirement. In the United States, homeowners who have reached the age of 62 or older are able to supplement their pension with cash drawn from the equity they’ve earned in their home; this is called a reverse mortgage.
Understanding Reverse Mortgages
The reverse mortgage, or HECM (Home Equity Conversion Mortgage), was implemented in 1988 by Ronald Reagan as a means of assisting elderly homeowners in keeping their homes. A reverse mortgage has no restriction on where money from the equity must be used. Homeowners have the option to spend this money however they choose. This is a unique type of loan, in that the money is paid out by the lender to the borrower, rather than from the borrower to the lender. The homeowner is not required to begin repayment until the home is sold or vacated, or if the homeowner passes.
If the home is vacated, the repayment of the reverse mortgage becomes due. Throughout the loan, the homeowner must keep up to date on additional payments, such as home insurance and property tax. If these payments are not made, the agreement is nullified.
Hiring an Estate Lawyer
If you don’t already have a will in place, hiring an estate lawyer becomes especially important in the event of a reverse mortgage. If you have a reverse mortgage in place when you pass, your spouse may continue living in the home. Once your spouse passes, your next of kin becomes liable for the repayment of the mortgage and the management of the home. Your estate lawyer helps explain the reverse mortgage repayment process and any options your children have when it comes time for repayment.
Before 2014, if your spouse was younger than 62-years of age, they were not extended the protection of the reverse mortgage but would be forced to pay the loan back. Since this time, the coverage now includes spouses of any age, so long as the home insurance and property tax payments continue to be made on time.
What Your Estate Lawyer Will Explain
Heirs listed in a homeowner’s will are offered six months following the death of the homeowner to pay the loan or sell the property. Throughout this time, interest continues to accrue. An estate lawyer, such as those provided by the Davidson Law Group, will explain this and other details of the loan so that it is properly dealt with and no penalties ensue.
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Contact Davison Law Group
For more information on reverse mortgages, wills, trusts, or services offered by Davidson Law Group, contact us today. An experienced estate lawyer will be happy to walk you through the process and answer any questions you might have. We serve the greater Dallas area, with offices in Fort Worth, Allen, and Tyler.