Wednesday, April 29, 2020

How Are Reverse Mortgages Dealt With During The Probate Process?


A reverse mortgage lets eligible homeowners tap into their home equity to meet the borrowers’ retirement expenses. In order to qualify, you should be at least 62 years old, reside in the property as your main home, and own the house outright or you have enough equity in the house.

No monthly payments of interest or principal are due on the reverse mortgage loan. The loan will accrue interest as well as other fees that aren’t due until a trigger situation happens. But, the borrower remains responsible for homeowner insurance, property taxes, maintenance, as well as the homeowner association fees.

You have three options for loan proceeds to be given to the borrower. These are a monthly payment, a lump sum, and a home equity line of credit.

The reverse mortgage will become due when one of these trigger events happen:
1.    The property has been sold or the title to the property has been transferred.
2.    The borrower is no longer using the house as his principal residence for more than 12 months.

3.    The borrower has failed to meet the obligations of the reverse mortgage, like paying property taxes, keeping the property in great condition, and maintaining homeowner’s insurance.

In case a surviving spouse isn’t a borrower, perhaps because he or she is below 62 years old, a federal case, holds that the lender can’t foreclose against a surviving spouse who is a non borrower at the death of the borrower/spouse. But the loan will remain due as mentioned above.

In case a house with a reverse mortgage will become subject to probate, the loan remains an encumbrance on the house. Encumbrances remain with the house while it changes ownership, and will continue until it’s satisfied. The house won’t revert to the bank once the last borrower dies. When that happens, the reverse mortgage must be paid off however, all of the remaining equity will belong to the beneficiaries or heirs of the borrower as per the terms of the trust or will. Reverse mortgage borrowers who will remain in their houses for several years will accrue more charges and interest on the reverse mortgage and the remaining equity cost will rely on how much money the borrower has taken out from their mortgage as well as the existing market condition.

The beneficiaries and heirs of the borrower have to determine when they would like to keep the house or if they want to sell the house. In case they would like to keep the house they should pay off the balance of the loan with a new loan using refinancing or with other source of income that’s available. In case they go for selling the house, they have to get in touch with the servicer of the reverse mortgage loan right away and let them know about their decision and also keep good communication with that servicer. The beneficiaries/heirs have from between three to 12 months, with the approval of the lender, to sell out the property. The good thing is a reverse mortgage loan is considered a non-closure loan, which means that when the amount that is due on the loan, including fees and interest, is far greater than the amount that the property will sell for the beneficiaries/heirs aren’t liable for any extra amount owed. A sale to an eligible third party and non related group doesn’t have any limitations. But the beneficiaries/heirs can’t sell the house to a family member for an amount that’s less than the cost of the loan.

Call Reverse Mortgage Specialist if you wish to know more about reverse mortgage loans.

 

David Stacey
Reverse Mortgage Specialist
Greenville, SC 29607
864 920 2733

http://reversemortgagegreenvillesc.com/

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