If you have a reverse mortgage, then you likely already know when the loan will become due. Most of the time the loan is due when either the person sells the home, does not live in it permanently anymore or if the person passes away. But when the latter occurs, what options do heirs have for paying back the loan? Here are the three reverse mortgage options heirs have to consider.
Keep The Home
Many heirs choose to keep their home even when they know the reverse mortgage loan is due. In this situation, they can refinance the home back into more of a traditional mortgage or purchase the home completely if possible. If the home is purchased, the amount paid will be the lesser amount of either 95% of the home’s appraised value or the amount of the loan itself. Every situation is unique depending on the loan terms and the amount of home equity available.
Sell The Home
Heirs sometimes opt for selling the home as well. In this situation, the reverse mortgage loan is paid off using the money the home sold for. Any additional amount of money will go directly to the heir. Some circumstances may lead to the loan balance being more than what the home sold for. If this occurs, the heir will not have to pay any additional money, but the entire amount of money the home was sold for will go toward paying off the loan. The terms of this specific loan indicates the remaining amount of the loan will be paid by FHA insurance.
Walk Away From The Home
The final option heirs have is to simply do nothing and walk away from the home. All they have to do is sign over the deed to the lender and they will take care of everything at that point. This situation generally occurs when the heir doesn’t want to deal with selling the home or if the home is in such bad shape that selling it would present significant challenges.
Commercial Mortgage Connection will walk you through all of your reverse mortgage options when the time arises. Once we understand your goals and desires, we will put together the best option in accordance with your interests. It’s important to know your options ahead of time as well, so the decision is made easier when the time arises. We will work with you throughout the process to ensure the best options are available to you. Don’t hesitate to contact us at any time to set up a consultation to discuss your reverse mortgage options with our experts.