Ask The Expert: Can I end up owing more than my home is worth?

Mark Schmidt Reverse Mortgage Specialist (773) 504-9633

Can I end up owing more than my home is worth?

Because the amount owed on a reverse mortgage increases over time, it is possible for the amount owed on a reverse mortgage to be more than the home is worth. It is not the most likely case, but it is possible. If this happened, there would not be any equity left in the home. However, your heirs would not be responsible for any shortfall between what was owed and the value of the home because a reverse mortgage is a “non-recourse” loan. This means that the lender can only look to the home for repayment - not the borrower or the heirs. No debt from a reverse mortgage can be passed on to your heirs. That said, in most cases, there should still be equity left in the home when the reverse mortgage is paid off.

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Comments

Posted by: Jeff Alten — 02/08/2013

The federally mandated mortgage insurance is probably the best insurance you'll ever buy. It guarantees you'll never owe more than what the house is worth. And, although you pay upfront for the coverage, it's actually credited on a monthly basis which means its possible for a refund of the unused portion.