Corona Reverse Mortgage Question - What happens to the reverse mortgage when I die?
Does the bank get the house?
A reverse mortgage is just that, a mortgage. When the last borrower passes away, the loan becomes due and payable 6 months from the date of death of the last borrower. The home itself becomes the property of the “estate”*. Heirs will have 6 months to decide how they want to repay the loan. Some will refinance the home, most will sell the home, and others will pay off the loan with available cash. If the heirs choose to sell the home then the reverse loan will be paid off as a part of the sale escrow/settlement and the “change” proceeds will be distributed according to the instructions. Pretty much the same as if the homeowner had passed away with a traditional mortgage. No payments are required on the mortgage by the heirs.
What if the balance on the loan is higher than the value of the home? Click here to see my post on just that subject!
* Depending upon how the deceased borrower set up their affairs will determine who has final title to the home. Some parents leave their home equally to all their children, some to one child, a church, grandchildren. It is a matter of the borrowers “final affairs”. If there was no will or trust then the laws of the state will determine who inherits the home. Always consult with a legal professional.
As always - I appreciate your comments, suggestions and questions.