Occasionally, individuals will bequeath their home to a loved one after they pass away as part of an inheritance. While this is a generous gesture, it can sometimes burden the beneficiary with unwanted responsibility. This may be especially true if the deceased had a reverse mortgage on the home prior to their death. While a reverse mortgage can provide the homeowner with valuable income during their lifetime, upon their death, the balance must be paid back to the lender. If the home is left to a loved one, it is their responsibility to settle with the lender before the property is truly theirs.
A reverse mortgage is available to seniors over the age of 62. It is essentially a loan that allows homeowners to turn their home equity into a monthly payment that may be used as income. When a homeowner dies, their estate typically pays the loan off through the sale of the home. However, when the home is left to a loved one, the loan must be paid by the new owner.
Within 30 days after the death of the homeowner, their heir must contact the lender and make arrangement to satisfy the outstanding balance. The loan can simply be paid by other funds or by selling the home. The other option heirs have if they wish to keep the property is to refinance it. However, depending on the length of the reverse mortgage, the amount due may be substantial.
If an heir fails to contact a lender within 30 days from the death of their loved one, the home may be subject to foreclosure. By contacting the lender in a timely manner, arrangements can be made to satisfy the loan and any fees associated with it before adverse action is taken. For heirs that have missed the 30-day window to make arrangements with the lender, consulting an attorney about other options may help avoid foreclosure.