INHERITING A HOUSE WITH A REVERSE MORTGAGE: WHAT YOU NEED TO KNOW
Reverse mortgages have become a popular way for elderly homeowners to tap into their home equity. However, when the homeowner passes away, their heirs are often left wondering what to do with the property and the mortgage. Here’s an overview of what you need to know if you’ve inherited a house with a reverse mortgage.
What is a reverse mortgage?
A reverse mortgage is a loan available to homeowners aged 62 and older that allows them to convert part of their home equity into cash. The loan is repaid when the last borrower dies, sells the home, or permanently moves out. The amount available to the borrower depends on their age, the value of the home, and the interest rate.
Options for repaying the reverse mortgage.
If you’ve inherited a house with a reverse mortgage, you have several options for repaying the loan:
- Pay off the mortgage balance in full with estate or other funds.
- Obtain a new mortgage on the property to pay off the reverse mortgage.
- Sell the property and use the proceeds to pay off the reverse mortgage.
The option you choose will depend on whether you want to keep the property and whether you have the funds to pay off the mortgage.
What if the property is worth less than the mortgage balance?
In some cases, the value of the property may have decreased, leaving the mortgage balance higher than the value of the home. In this situation, the reverse mortgage is considered a non-recourse loan, meaning that the lender can only recoup the value of the home and cannot go after the estate or heirs for the remaining balance.
Inheriting a house with a reverse mortgage can be complicated, but understanding your options can help you make the best decision for your situation. Consult with an estate planning attorney for guidance on how to proceed.