Reverse Mortgages and 2009…. I wonder how the drastic drop in interest rates has affected existing reverse mortgages…. the payouts were based primarily on high(er) interest rates and life expectency… effectively borrowing money against the equity in your home…… what if that equity has vanished? Is the interest rate fixed rate or variable? What happens if you have no equity left and you’re still alive – is that your problem or the lenders? What if your lender goes bankrupt? Do you have a chance of being forced to repay the loan now?
So many questions, so many possible problems…
The only thing that’s very clear about this is that if you took out a reverse mortgage and you’re now “upside down” because your reverse mortgage blance (+ 1st mortgage if you have one) is greater than the market value of your house, you have a big problem. If you want to move (perhaps to a skilled nursing facility), you move out of your house, or the house is destroyed by fire, etc… the reverse mortgage becomes immediately due, and you’ll have to come up with the cash to pay the deficit. Apparently many of the troubled loans being held by the government are reverse mortgages that went sour…