Reverse Mortgage Estate Implications: Inheritance
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Inheritance is a subject that people don’t really talk about that often, simply because it is a touchy subject. Inheritance is always tied to the passing of a relative and that can be a difficult topic to deal with. While it is understandable if you feel hesitant to think or talk about inheritance, it is nevertheless an important topic to consider when it comes to reverse mortgages. This is because the method of repayment that is usually used for a reverse mortgage is the selling of the house after the passing of the homeowner, who is also the person that signed up for the reverse mortgage loan in the first place.

Anything that has to do with possessions of the deceased after their date of passing is by definition going to involve the estate of the deceased and that includes any loans such as reverse mortgage loans that they might have outstanding at the time of their passing. Reverse mortgage lenders are usually quick to call in the loan when they hear of the passing of the borrower and therefore it helps for both the borrower and the potential executor of their estate to be well aware of these issues far in advance of the date that they might come into play.

Estate Implications

As previously mentioned, when a person passes away, their property falls under the ownership of their estate. If they have signified an inheritance in their will, then the house goes to that inheritance. If they have failed to do so, then the procedure becomes more complicated. However, both of these cases are trumped if they had a reverse mortgage agreement, simply because the reverse mortgage loan is paid back through the selling of the property.

While this is basic stuff when it comes to reverse mortgages, what is not so basic is what happens to the rest of the estate’s possessions. A lot of people that are reverse mortgage critics will tell you that the reverse mortgage lenders have claim over all of the estate possessions and can choose to liquidate everything if they want. However, research and knowledge of the facts shows that this is most definitely not the case. The amount of money that can be borrowed in a reverse mortgage, the interest attached to that money, and the fees involved, all need to add up to an amount that is less than the value of the property. Therefore, it is impossible for the liquidation of the property to come up short of paying back the loan and that in turn means that none of the other estate possessions can ever come under the ownership of the reverse mortgage lender.

When it comes right down to it, this is really the beauty of the reverse mortgage. There is absolutely no way anything beyond the property can be touched by the debt, which in turn means that the estate and by extension the heirs are not going to have to worry about being taken over. While this is definitely a worry with some types of loans, a reverse mortgage should only be a source of comfort.

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