What Happens To A Reverse Mortgage When One Spouse Dies?

What Happens to a Reverse Mortgage When One Dies?  Find out here what will happen to your reverse mortgage if you pass away.

While a reverse mortgage is an excellent financial tool used by many retired individuals to gain additional cash flow, a reverse mortgage can be quite confusing.  Many reverse mortgage borrowers are unaware of what the ramifications of the reverse mortgage could be after they die.

Heirs Must Sell Home

After one dies a reverse mortgage must be paid off by the heirs of the deceased.  In most situations, this will require the heirs to sell the home that is acting as collateral on the loan.  If the heirs do not want to sell the home or are not able to sell the home due to the poor market conditions, they will be forced to either refinance the mortgage or find another way to pay it off.

Continue To Gain Interest

Another event which happens to a reverse mortgage when one dies is the mortgage balance continues to gain interest.  While the homeowner’s heirs normally have 6 months before they are required to sell the home or begin paying off the reverse mortgage, the account balance will continue to gain interest.  Since no payments are being made, this could drastically increase the amount owed.

Potential Foreclosure

An unfortunate situation which could occur because of a reverse mortgage after one dies is potential foreclosure.  If the heirs of deceased are unable to sell the home, make payments, or refinance the mortgage, they will eventually go into default on the loan.  This could eventually lead to a potential foreclosure or short sale of the home which will drastically reduce or completely eliminate the deceased’s home equity, and could possibly tarnish your heirs credit score if they co-signed a reverse mortgage.

Related posts:

1. Am I Eligible For A Reverse Mortgage If My Spouse Is Under 62?
2. Can I Get A Reverse Mortgage If My Spouse Is In A Nursing Home?
3. Is A Reverse Mortgage A Smart Move For Me And My Spouse?
4. My Spouse Is In A Nursing Home, Can I Get A Reverse Mortgage?
5. If I Am 62 And My Spouse Is Not, Can We Get A Reverse Mortgage?

This entry was posted on Sunday, February 21st, 2010 at 8:20 pm and is filed under reverse mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.