How Are Reverse Mortgages Settled?

Reverse mortgages are a complicated subject, so today I wanted
to discuss what you need to know about them and how you can pay
them off.





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How do you pay off a reverse mortgage on a property?

As more and more seniors turn to reverse mortgages in current
times, their surviving spouses and/or children have a couple of
options to do this once they pass on. 

One of those options is to pay that loan off immediately by
putting that property on the market, covering the cost of the
sale, and paying off the loan with the net proceeds. Also, if
a property is “under water” at the time that the owner passes on,
meaning that the loan value is higher than the property value,
the home can be sold to the surviving owner(s) of the property
for 90% of the market value. 

It’s important to note that if a homeowner passes on and they
had leased that property out, then that property loan is due
immediately. If, by chance, you have an older family member
that has a reverse mortgage on a home, you’re gambling a bit if
you have that property rented out because, according to the
rules, you can’t do that. More importantly, if you do break that
rule and the lender doesn’t understand that or is aware of that,
then at the time that the owner passes on, there could be some
legal issues that arise relative to that tenant’s rights. This is
a scenario that you should speak with a real estate attorney
about.


Speak with an expert so you don’t leave yourself or your
loved ones vulnerable.

Another important factor in a reverse mortgage is the
notice of demise. This talks about how the mortgagor
determines whether or not an owner has passed on. They do this
through a number of different sources, such as searching the
social security death index or other proprietary databases that
talk about whether the owner is still alive. Your family member
may also receive an annual letter from the lender confirming that
they’re a) still alive, and b) in the home.

What are the spousal rights when a spouse passes on and there’s a
reverse mortgage on the property? The surviving spouse might be
able to remain in the home even if he/she wasn’t the co-owner
because of certain HUD guidelines. This is important because some
borrowers will remove a younger spouse from their home title to
secure a reverse mortgage. You have to speak with reverse
mortgage companies to understand what those details and
requirements are so you don’t leave a younger spouse
vulnerable to eviction and potential foreclosure after an older
spouse’s death. 

Reverse mortgages are a complicated subject, so if you’d like
more information about them, please don’t hesitate to give me a
call. I look forward to speaking with you!