inheriting a home with a reverse mortgage
This is a question that many ask about since there are no mortgage payments made on a reverse loan as are required on a traditional loan.
Plus there is no loan term but when does the loan become due and what are those circumstances?
They are referred to as a “maturity” event and include the following situations.
- Sells the home Conveys title of the property to someone else
- Passes away
- Resides outside of the principal residence for a period exceeding 12 consecutive months due to physical or mental illness
- Fails to pay property taxes, insurance premiums, condo fees, and other “mandatory obligations,” and all options to bring the loan current have been exhausted
- Fails to maintain the home and allows it to fall into disrepair.
The most common reason for the loan becoming due and payable is that the borrower(s) has passed away and the property and or the estate has been received by the heirs.
As soon as is possible, the heirs must contact the Loan Servicer letting them know that the borrower(s) have passed away. The Loan Servicer will send them by mail a “Due and Payable” letter within 30 days and the heirs must respond as soon as possible to the Lender.
The Loan Servicer will explain the options the heirs have to repay the loan and it’s very important that the heirs contact the Lender by calling or emailing them to avoid the possibility of a foreclosure being activated by the Lender.
The Lender does not want to foreclose on the property and the heirs have the option of refinancing it and putting the Title in their name or simply selling the home and thereby paying off the reverse mortgage.
But it is crucial that the heirs respond to the Lender letting them know how they plan to repay the loan. The Lender will work with the heirs and help them through the steps to satisfy repayment, but communication is very important in the process.
My next post will go into additional details about how to satisfy the repayment and other details about the entire process.