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How Does a Reverse Mortgage Affect the Size of the Borrower’s Estate?
How Does a Reverse Mortgage Affect the Size of the Borrower’s Estate?

The borrower’s estate receives the equity in the property at the time the borrower dies or moves out permanently. The equity equals the property value realized through sale, less the balance on the reverse mortgage.

Some HECM options deplete the estate more than others. Cash withdrawals at the beginning will reduce it the most, credit lines that are rarely used will reduce it the least, and monthly payment plans are somewhere in-between. In general, the longer the borrower remains in the house, the larger the depletion of equity.

Borrowers who want to retain as much equity as possible for their estate can elect the low mortgage insurance premium plan, which offers smaller withdrawal amounts and a slower rise in the debt balance.