HuffPost: Reverse Mortgages Among Inheritance Surprises

For those inheriting property that has a reverse mortgage, it’s important to note that while a reverse mortgage was a great source of income for the decedent prior to death, that money has to be repaid to the lender, including all of the capitalized interest thereon, writes The Huffington Post in a recent article.

A reverse mortgage is one of 10 possible surprises one might encounter when inheriting real estate, article notes.

“Your real estate inheritance with a reverse mortgage will not be owned by you free and clear,” Huffington Post says. “Instead, the real estate will be encumbered by a significant mortgage that you cannot make monthly payments on and instead, such mortgage needs to be repaid prior to you calling that real estate your own home.”

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Based on New York law, those inheriting real estate with a reverse mortgage have 30 days after the date of death to notice the lender whether they intend to pay off the mortgage from other monies, a refinance, or a sale of the real property.

“All are advised to speak to an attorney whenever inheriting any property,” Huffington Post says.

Read the article here.

Written by Cassandra Dowell

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  • The article is incorrect in many respects and very misleading except in New York and states with similar inheritance laws.

    As to reverse mortgages it is clear the author has no idea what he is talking about when he says: “While a reverse mortgage was a great source of income for the decedent prior to death (it’s available to those aged 62 and older), that money has to be repaid….” Income that has to be repaid? Cash out from a forward mortgage is never called income because it like proceeds from a reverse mortgage is not! They are both loan proceeds.

    Here is another classic misconception about reverse mortgages: “Instead, the real estate will be encumbered by a significant mortgage that you cannot make monthly payments on and instead, such mortgage needs to be repaid prior to you calling that real estate your own home.” Like any mortgage, the encumbrance will be no greater than the balance due as of the date of death plus all costs on the mortgage accruing thereafter. Yes, most borrowers will have large balances due on reverse mortgages because they did not or could not manage the debt. Those who have managed their reverse mortgage well during life so that as of their date of death, the balance due is relatively low will pass on a property with a mortgage with a slightly higher balance due because of normally accruing costs. A reverse mortgage is simply a non-assumable mortgage.

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