Inheriting a house with a reverse mortgage can present unique challenges, depending on the loan terms and your financial situation. Here’s what typically happens:
1. Understand the Reverse Mortgage Balance
- A reverse mortgage allows the homeowner to borrow against the equity of their home. The loan is repaid when the homeowner moves out, sells the house, or passes away.
- If you inherit a home with a reverse mortgage, the loan becomes due immediately. The lender will usually give heirs 30 days to respond with a plan, but extensions of up to six months are common.
2. Your Options as an Heir
Heirs generally have three options when dealing with a reverse mortgage:
a. Keep the Home
- To keep the home, you must pay off the reverse mortgage balance, which is typically the lesser of:
- The loan balance (including principal, interest, and fees).
- 95% of the home’s appraised value.
- You can pay this off using personal funds, by refinancing the loan, or taking out a new mortgage.
b. Sell the Home
- Selling the home can help repay the loan. Any proceeds exceeding the loan balance belong to the heirs.
- If the home’s value is less than the loan amount, heirs are not responsible for the deficit. Reverse mortgages are non-recourse loans, so the lender cannot pursue heirs for more than the home’s value.
c. Walk Away
- If you don’t want the home or can’t afford to repay the loan, you can decline the inheritance. The lender will foreclose on the property and sell it to recover the loan amount.
3. Other Considerations
- Time Frame: The lender may grant extensions, particularly if you’re actively working to sell or refinance the home.
- Taxes and Maintenance: If you plan to keep or sell the home, you’re responsible for property taxes, insurance, and maintenance while the reverse mortgage is settled.
- Family Decisions: If multiple heirs inherit the house, you’ll need to coordinate decisions about the property.
4. Steps to Take
- Contact the Lender: Notify them of the homeowner’s passing and discuss your options.
- Appraise the Home: Get an appraisal to understand the current market value.
- Seek Legal and Financial Advice: An attorney or financial advisor can help navigate inheritance laws and determine the best option.
Inheriting a house with a reverse mortgage can be complex, but with the right information and planning, you can make a decision that aligns with your financial and personal goals.
Inheriting a house with a reverse mortgage can feel overwhelming, but you don’t have to navigate it alone.
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Whether you want to keep the home, sell it, or explore your options, understanding the process is key.
Need guidance? Reach out to Trealtorr today! Call or text us at +1 (347) 831-6085 for personalized advice and solutions tailored to your situation. Let’s make the process as smooth and stress-free as possible!