Reverse mortgages have become very popular among seniors in the real estate industry. With a reverse mortgage, a senior property owner can borrow money using the home for collateral. The feature is that the loan does not need to be repaid until the last surviving homeowner dies or the home is sold. While this can be a boon for seniors, the heirs need to be wise in their choices later to avoid problems. Consult a College Station probate lawyer if you are experiencing problems with a deceased parent’s reverse mortgage.
How Reverse Mortgages Work
A homeowner must be age 62 or older to qualify for a reverse mortgage. The plan works by allowing the senior to take out an equity loan without making any payments long-term. Repayment of the loan becomes due when the last surviving owner dies, moves away, or sells the home. After the death of the homeowner the house becomes the property of named heirs, who can choose to:
- Repay the loan with their own assets
- Sell the home in order to repay the loan
- Purchase the house from the lender
- Deed the home back to the lender
- Allow the lender to foreclose on the property without taking any action
If the heirs decide to purchase the home, they can do so at 95% of the appraised value. Assuming the property has lost value since it was purchased, this can prove a great bargain. However, they must decide quickly. They only have 30 days from the time probate closes and the property is theirs to decide whether to buy or not, and no more than six months to find a lender who will finance the loan.
A Problem with Lenders
A New York Times report indicates that a number of lenders are failing to notify heirs of their rights to purchase properties in cases of reverse mortgages. Instead, they have been starting foreclosure proceedings immediately or inundating heirs with so much paperwork that the latter often abandon their efforts to purchase the property. Such practices are unfair and illegal, and should be reported.
Lenders Cannot Sue the Estate if the Loan is Not Repaid
Heirs who opt not to purchase a home left to them with a reverse mortgage do not need to worry about repercussions from the lender. Lenders are not legally allowed to enforce repayment of the loan. Moreover, if heirs decide to allow the lender to foreclose, this should not affect their credit.
For Assistance with a Property with a Reverse Mortgage
If you are an heir to property to which a reverse mortgage is attached, it is in your best interests to work with a College Station probate lawyer who understands this complicated area of probate law. Call Peterson Law Group today at 979-703-7014 or 936-337-4681.