Reverse Mortgage: Top 10 Things to Know When a Borrower Dies
Is it Time to Relax? Mom and Dad are gone. You know they had a reverse mortgage on the house – What happens now? What can you do? What should you do?
Top Ten Things You Should Know. a reverse mortgage can be a wonderful thing – they allow people on fixed incomes to get paid and “live” on the equity in their homes, but when the last borrower dies, things start to happen and the time for the children and heirs to decide and act is limited.
10 things to know:
- Pay Upon Death – A reverse mortgage loan becomes due upon the death of the last borrower;
- 95% Rule – The amount due is the lesser of the loan balance or 95% of the market value of the home determined by a current appraisal obtained by the lender- insurance pays the difference;
- Stay and Don’t Pay – If 2 or more borrowers are involved, then the death of the first borrower does not trigger loan payment and the surviving borrower(s) can continue to live in the home;
- The “Bucks” Stop – Monthly payments from the lender stop upon the death of the last borrower;
- Keep It or Sell It – Upon the death of the last borrower, the heirs can keep or sell the home and pay the loan;
- The Meter is Ticking – Once the loan is due, it’s generally best to pay if off quickly to keep the interest and loan expenses from eating away at any remaining equity in the home;
- “Equitable” Decision – The decision whether to pay the loan and keep the home or not is usually determined by whether any “equity” is left;
- Pay or Walk Away – If the equity is gone then unless they want to come “out-of-packet” to pay the loan, the heirs should remove all personal property; turn-over the keys to the lender and “walk away”;
- 6 Months – The loan must be paid within 6 months of the last borrower’s death and the heirs retain possession until then; and
- No Recourse | No Worries – Reverse mortgages are “nonrecourse” – the lender can’t reach the other assets of the Estate to pay the loan – the heirs are not personally liable for any unpaid portion of the loan – and the Estate is entitled to keep any excess equity after the loan is paid.
I need help fast – Who do I call? At Coover Law Firm, LLC, Howard County Attorney Fred L. Coover, Esquire is prepared to help you with all of your legal and estate planning needs promptly and efficiently. Contact us today at (410) 995-1100 to schedule a no-risk initial consultation in our Columbia, MD office.
Disclaimer: The information in this blog post is provided for general educational & informational purposes only. It is not intended to convey legal advice or serve as a substitute for legal counsel on any subject matter.