What happens when a reverse mortgage borrower passes away? Kiplinger tackles the question in an article this week, underscoring the fact that the borrower’s heirs will never owe more than the home is worth.
The loan will have to repaid shortly after the borrower moves from the home or passes away, Kiplinger writes, but there are options for those heirs.
“If one spouse has died but the surviving spouse is listed as a borrower on the reverse mortgage, he or she can continue to live in the home, and the terms of the loan do not change,” the article writes. “At the death of the last borrower, though, adult children and other nonspouse heirs must pay off the loan. They can keep the property, sell the property or turn the keys over to the lender—and their decision is ‘usually driven by whether there’s equity left in the property,’” Joseph DeMarkey, a principal member of Reverse Mortgage Funding told the publication.
Kiplinger details the “non-recourse” feature of reverse mortgages, explaining that the lender cannot go after the heirs’ estate or assets if the loan balance exceeds the value of the home with the reverse mortgage.
It’s in the heir’s best interest to act quickly, Kiplinger writes, in explaining the time line for notifications from the loan servicer and repayment.
Written by Elizabeth Ecker