Reverse mortgages. Mom is dead, what happens to the mortgage?

Reverse mortgage payable when owner dies.

It's a common question- what happens when the  borrower dies?  The general rule is that the  death of the borrower accelerates the due date of the loan.  The loan must be satisfied through either a mortgage refinance or sale of the property.  Practically speaking, if the estate or its heirs do not want to keep the house, it will be listed for sale and the mortgage paid off at closing when title is transferred.

Here's how the question was posed in a recent column on NJMoneyHelp.com:

Q. I just found out my mother put a reverse mortgage on her house. I live with her. Would I have to move out if she dies? She is the only person on the deed and I’m her only beneficiary.
— Helping out

A. We’re glad you found out about the reverse mortgage so you can understand the consequences.

Keep in mind that each reverse mortgage is different, but we can give you a general idea of how they work.

A reverse mortgage can be taken out in a lump sum or your mom could have decided to receive monthly payouts, said Steven Gallo, a certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.

“Either way, the mortgage company will have a first lien on the property for the amount it has given your mother plus accrued interest,” Gallo said.

Upon your mother’s passing, the mortgage becomes due and you would have to pay off the mortgage if you decided that you wanted to keep the house,” Gallo said. “You would need to take out a new mortgage in your name for the amount owed or come up with the cash from some other source.”

Most reverse mortgages are due within 30 days of the death of the borrower, but 90 day extensions may be granted, Gallo said.

If you are unable to pay off the mortgage, you would have to sell the home and pay off the reverse mortgage balance, Gallo said. Any remaining proceeds would be yours to keep.

“You would not be able to stay in the house without paying off the reverse mortgage,” Gallo said.

We recommend you review the legal documents for the mortgage so you can see exactly what your mother agreed to when she signed the documents.

Any  questions?  Give us a call.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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