When a loved one passes away with a reverse mortgage, it can add an extra layer of complexity to the estate administration process. As a Torrance estate administration lawyer, I often guide families through this challenging situation, helping them understand their options and obligations.
A reverse mortgage allows homeowners aged 62 or older to borrow against their home’s equity while continuing to live there. However, when the borrower passes away, the loan typically becomes due. This leaves many families wondering: “What happens next?”
First, it’s important to understand your timeline. After your loved one’s passing, you generally have 30 days to notify the reverse mortgage lender. The lender will then send a due and payable notice, giving you several options:
- Pay off the reverse mortgage and keep the home
- Sell the home to satisfy the loan
- Complete a deed in lieu of foreclosure
- Allow foreclosure to proceed
The good news? You’re never personally responsible for paying more than the home is worth. Reverse mortgages are “non-recourse” loans, meaning the lender can’t pursue your personal assets or other estate assets to cover any shortfall.
If you decide to keep the home, you’ll need to pay either the full loan balance or 95% of the home’s current appraised value, whichever is less. Many families accomplish this through refinancing or using other estate assets.
Selling the home is often the most straightforward solution. Work with your Torrance estate administration lawyer to ensure the sale proceeds properly through probate. Any equity remaining after paying off the reverse mortgage belongs to the estate for distribution to heirs.
Time is critical in these situations. While you typically have six months to settle the reverse mortgage, extensions are often available if you’re actively working to resolve the situation. However, it’s crucial to communicate proactively with the lender and seek legal guidance early in the process.
Remember, handling a reverse mortgage in estate administration doesn’t have to be overwhelming. With proper legal guidance and a clear understanding of your options, you can navigate this process effectively while honoring your loved one’s legacy.
Need Further Help?
If you’re facing the complexities of a reverse mortgage in your loved one’s estate, you don’t have to navigate these waters alone. Our compassionate team of estate administration lawyers understands both the emotional and legal challenges you’re facing. We’re here to help you honor your loved one’s legacy while protecting your family’s interests. Contact us at 310-782-6322 to schedule a consultation where we can discuss your specific situation and create a clear path forward together.