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Reverse Mortgage Loans: What Happens to the Home After Death?

Once all borrowers on the reverse mortgage loan have passed away (or moved out of the home), the reverse mortgage loan will become due.  If you are an heir to a deceased reverse mortgage loan borrower, what are your options?

Let me preface this by saying that the lender/bank does not automatically get the home.  They do not own the home, take title to the home or own the equity the home has in it.  As an heir, it is your responsibility to determine what happens next.

The first thing you should do is contact the reverse mortgage loan servicer to inform them that your loved one has passed away.  It is important to maintain contact with the servicer throughout the process.  This is especially important if you want to sell the home, as you have 6 months to do so.  If you have been in regular contact with the servicer, they can request two additional 90 day extensions from HUD, doubling your time-frame.

If you do not wish to keep the home, your options are as follows:

  1. Sell the home.  This option is usually taken when the home has equity remaining.  If this is the case, you would simply place the up home for sale.  When the home is sold, you (the heirs) will receive the remaining equity.
  2. Sign a Deed-in-Lieu of Foreclosure.  Heirs choosing this option are usually those who find that there is no equity remaining in the home, and therefore, they would like to sign the home over to the lender rather than try to sell it.

If you want to keep the home, you can do one of the following:

  1. Pay off the loan.  In this case, you would either provide your own cash to pay off the loan, or get a traditional mortgage loan in order to pay off what is due on the reverse mortgage loan.
  2. Pay 95% of the home’s value.  Remember that the reverse mortgage loan is a non-recourse loan.  This means that there is no recourse for any mortgage loan balance other than the home itself.  The borrower (or heirs in this case) are not responsible for any amount which exceeds the value of the home at that time.  In fact, they are only obligated to pay the smaller of the outstanding loan balance, or 95% of the home’s appraised value at the time.  The money can come from any source, but typically, the heirs will pay for this through refinancing the loan with a traditional mortgage loan or using proceeds from the estate.

If you’d like more information, please call us.  We are happy to answer any questions you have.  855-469-7383

About the Author Laura Funderburk

Laura Funderburk is a highly sought after reverse mortgage loan specialist in Dallas, Texas. She has focused on this specialty loan for many years and stays up-to-date on the latest trends and changes. She is known for helping retirees supplement their retirement income using a reverse mortgage loan without being pushy or overbearing.

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