What Happens to a Reverse Mortgage After the Owners Pass?

reverse mortgage advisor connecticutA common question and concern surrounding a HECM reverse mortgage in Connecticut is what will happen to the home after the homeowners pass away?  Will the bank take possession?  Will it be allowed as inheritance?  Will it be possible to keep the home in the family?

These are very valid concerns – so I’d like to offer some clear and concise guidance.

When the last homeowner passes, whether we’re talking about you or a loved one, the home will transfer into the estate or a specific person according  to the wishes expressed in the homeowner’s will.  At this time there are three main options:

1.  Pay off the remainder of the loan

Depending on the amount of equity that still exists in the home, the financial situation of the family, and just the overall ability of those involved, this may or may not be a feasible option.  It’s not uncommon for a portion of life insurance to be used in this manner.  Because theses loans are FHA insured, no one will ever owe more than the home appraises for.

2. Obtain a conventional loan.

Many mortgage brokers are familiar with the reverse mortgage process and the right broker will be able to help those in need identify the best route in obtaining a conventional loan and keeping the home.

3. Sell the home

The final option is to sell the home.  When there is not a desire to keep the home, the heirs can sell the home.  If the home sells for less than the loan amount, the FHA insurance will cover the difference.  If the home sells for more than the loan amount, the remaining equity will end up in the hands of the heirs.

One last note, as long as the communication lines remain open, the bank will typically allow up to one year to help with the transition.  This one year is allotted in three month increments.

Reverse mortgage is an individualized, specialized loan for those 62 and over that allows older homeowners to tap into the equity of their home while living mortgage and loan payment free.  The funds can be accessed via a lump sum, line of credit, monthly installments, or even to purchase a home. Working with an experienced and reputable Connecticut reverse mortgage lender is a must.

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.

 

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