Your heirs responsibilities to a reverse mortgage, once you have passed away, have three options available. Many seniors who are considering a reverse mortgage think that their children or grandchildren may be responsible for the balance owed on the property if the balance is more than the property is worth, which is simply not the case. Your heirs essentially have three options available to them: sell the home, keep the home or simply walk away from the home.Sell the Home
Once you pass away, your heirs have the choice to sell the property and if the properties value exceeds that of the loan balance then they will keep that difference for themselves. If the loan balance exceeds the value of the property then once the home gets sold the FHA, which insures the loan, will pick up the tab on the difference and pay the lender on the estates behalf. Nothing would be owed by anyone else, nor will it affect them in any way.
Keep the Home
Another option that your heirs have is to keep the home. If they choose this option, then there will be a couple of different ways to do it. First, they can refinance the loan up to 95% of the value of the home or the balance of the mortgage, whichever is lower. So if the loan balance to greater than the value of the property, once again the FHA will step in and pay off the loan balance to 95% of the properties value. Or if your heirs want to, they can completely pay off the loan balance with their own money or the proceeds of your life insurance, of course that is their option.
Walk Away
The last option is to simply walk away from the property. If your heirs want absolutely nothing to do with the home, then they don’t even have to lift a finger. The estate will sell the property for you and your heirs will not have a single responsibility to it.
The reason why your heirs will not have responsibility to the property or its loan is that reverse mortgages are non-recourse loans.
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http://www.reversemortgageloanfinancing.com/2013/08/08/heirs-responsibilities-to-a-reverse-mortgage/
Heirs Responsibilities to a Reverse Mortgage
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Reviewed by Merlyn Rosell
Published :
Rating : 4.5
Published :
Rating : 4.5