When you have a reverse mortgage there are a few ways that your estate will be affected once you have passed away. The first, and possibly most important, issue will be ownership of the home. When the owners of the home have passed away, and there is a reverse mortgage on the property, the lender will assume ownership of the home, not the estate. Heirs will be offered the opportunity to repay the debt and purchase the home before it is ever listed on the market. If the heirs/estate declines the option to purchase, the lender will place the home up for sale to cover the debt. If the sale brings additional money, above the cost of the debt, the lender will issue the extra amount to the estate. However, if the sale does not cover the loan, and the mortgage was not insured, the estate may be liable for the remaining debt.
How Else Will A Reverse Mortgage Affect My Estate?
Many times, if the market is slow and the home does not sell quickly, estates remain in probate for an extended period of time. Many states have now enacted laws that will allow a probate case to proceed without final authorization of the reverse mortgage lender, but many still make the estate wait. If there is a balance remaining on the reverse mortgage the estate may be obliged to cover the remaining debt.
Will A Reverse Mortgage Lender Charge My Children For My Debt?
The reverse mortgage company cannot attach your personal debt to another person. However, they can attach this debt to your estate and demand payment before any other disbursements are made. A reverse mortgage often takes precedent over any other form of bills or obligations. It will definitely take precedent over any inheritance amounts to individuals. The best option is to purchase reverse mortgage insurance and the issue will never arise after you are gone.
Related posts: