When a person dies that has a reverse mortgage on their home, the ownership of the property reverts to the lender. As an heir to the estate you will have first option to repay the loan and assume ownership. This can be done either through a cash payout or a new mortgage. If you decide not to keep the house it will be sold to pay the debt. As an heir to the estate you may be obligated to pay any remaining balance on the loan if the reverse mortgage was not insured. A non insured reverse mortgage will become an outstanding debt on the estate if the sale of the home fails to cover the debt.
My Parents Want To Get A Reverse Mortgage Should I Encourage Them To Get An Insured One?
It is always a safer plan to purchase mortgage insurance on a reverse mortgage. These insurance plans will pay the lender any additional funds if the sale of the home does not cover the debt. While purchasing one of these policies may reduce the monthly income from the reverse mortgage, the benefit it provides is well worth the cost. An uninsured reverse mortgage could result in the children of the deceased being obligated to pay the lender the remaining amount of the loan.
My Parents Home Sold For More Than What They Owed On Their Reverse Mortgage – What Happens Now?
In the event that a home with a reverse mortgage on it sells for a higher price than the debt against it, the estate will receive the additional money. By law, a lender can not keep more than what they are owed. Any proceeds that exceed the reverse mortgage will automatically be distributed to the estate.
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