The amount that a senior can borrow with a reverse mortgage is a percentage of the value of the house. That percentage is determined by the age of the youngest borrower and current interest rates. The older you are, the more you can borrow. Government-backed reverse mortgages come with mortgage insurance that covers the shortfall if the value of the home is less than the loan balance.
A reverse mortgage is a loan that must be repaid. If the borrower dies, it must be repaid by the estate or the heirs if the heirs would like to keep the home except for a spouse who may stay in the home. Where the loan balance exceeds the property value, heirs can buy back the house for 95 percent of its property value rather than the full value of the loan.
While those remaining in your home after your death might be family members, if they are not on the title, they are considered tenants. Therefore if you take out a reverse mortgage that results in the home being sold after you die, they could potentially lose a place to live unless the heir is your spouse. If you are considering a reverse mortgage and have questions about how it will impact your estate planning, consult with an experienced estate planning attorney.