My mother at age 83 took a reverse mortgage last year and died last month. My sister who is 55 years old is the remainderman of her estate and has been living in the house with her for many years. She still lives in the house. Will she be forced to sell the house or can she continue living there?
Expert Answer by Denis Clifford
The bank holding the reverse mortgage will want, and be legally entitled to, repayment of the money it is owed under that mortgage. Your sister needs to determine how much money is owed to the bank. Then the question becomes how she can pay that money to the bank. This would depend on:
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What financial assets, aside from the house, your sister has;
The terms of the reverse mortgage. There are different types of reverse mortgages, with varying repayment requirements
What the bank is willing to do regarding repayment. Will it accept repayment spread over time, or will it insist on prompt full payment?
I surely hope that your sister can continue to live in the house. That's certain how it should be.
Answer
Oct 28,2009 - When the borrower (YOUR Mother) of the reverse mortgage passes away, so does the reverse mortgage, it was for your Mother, she signed for it. The borrower of the reversed mortgage usually gets a lump sum up front that goes as a lien on the property. In California, there are No FREE rides for the ESTATE allowed upon the death of the borrower , the reverse mortgage must be paid off ASAP after death. That lien along w/the HIGH interest rate must be paid in full thru the ESTATE. What happened to the reversed mortgage money? May be there is some left to help the ESTATE to pay the reverse mortgage off. The money was for your MOTHER to live in comfort for the remainder of her life, not for the ESTATE to live comfortable…………………………………………….
Answer
I agree with the prior answer as it is unfortunate that after a death of a loved one the heirs are forced to face the reality of a Reverse Mortgage that may not have been understood initially. This is one of the harsh consequencess that can come with a Reverse Mortgage,.. the price and terms paid for the financial benefits. You will likely have to pay off that which is due $$ now which frequently is shockly much higher than expected because of the effect of the negative compounding of interest and principle build up the longer you hold it. Hopefully your sister will be able to possibly refinance as these type of situations commonly are accompanied by limited other assets. The longer you wait the more it will cost as time works against the heir in this situation.
This may prove to be one of those additional difficult financial decisions which conflicts with personal choice of both the heir and the decendent.
Answer
Though not a professional expert on the subject of reverse mortgages, I am responding because I have a sister whose situation was very similar to the one described and who has been a 'casualty'. My sister lived in the family home with our mother for many years. In 2003 - when our mother was in her early 80's she signed up for a reverse mortgage to make some repairs/improvements to the house. She passed away in Sept. 2008. My sister - who was left the house in our Mother's will, had no way to pay off the money owed the bank (which had grown substantially as a result of fees, interest, etc. etc) and as a result has been forced to sell and move out. Tragically the bank is walking away with most of the money from the sale of the home, my sister has little to show from her time/investment while living there and in later years looking after our mother. At age 64, she is ill and unable to work. The experience has been devastating. I wish your sister good luck.
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