What Can Happen If A Parent Dies And Leaves A Reverse Mortgage?
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What Can Happen If A Parent Dies And Leaves A Reverse Mortgage?

If you have parents who are getting older and they also have a reverse mortgage on their home, it’s important to understand what all can happen involving that debt when either one or both of them passes away. If and when that time comes, it’s likely that the lender will end up wanting to move the process along as quickly as possible, meaning that it’s extremely important for you to be prepared.

Here are the ways in which you can deal with a reverse mortgage upon the death of your parents:

*You and other heirs will all receive a letter from the loan servicer which explains all of the rules, as well as asking what you’re thinking of doing with both the loan and the property.

*Always keep communication open and answer all questions from the loan servicer the best way that you can.

*If you wish to keep the home, then the loan must be paid off. In all, you will not owe more than 95% of the total appraised value of the home. This is also the case if the balance of the loan is more than that amount.

*If it’s determined that the home is valued at more than the amount that’s owed, you will be permitted to sell the home and keep the difference in terms of funds.

*You will also have the option to sign a deed-in-lieu of foreclosure, which will essentially give the home to the lender. This should be done if you do not want the home and if the balance of the loan exceeds the value of the home itself.

It’s important to note that whenever the borrower of a reverse mortgage passes away, these mortgages will technically become due and payable. This is done with the understanding that heirs won’t actually be able to refinance or sell the home on the day that a borrower passes away in order for the debt itself to be satisfied.

In terms of surviving spouses, they may be able to retain ownership of the home, but only if they were not a co-borrower. This is important due to the fact that there are some borrowers who choose to remove a younger-aged spouse from the title of the home so that they can obtain a larger reverse mortgage. Unfortunately, this can leave the younger-aged spouse more vulnerable to being evicted, as well as foreclosure on the home when the older spouse passes away.

Perhaps the best and most important step to take regardless of where you may currently be in the process is to hire an experienced attorney, especially if the individual involved is a spouse who’s a non-borrower. This is because potential legal issues could arise if a home is foreclosed on by a lender if a spouse is still surviving.

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