Q: How do Reverse Mortgages work and what must I do to force the company to provide me the balance owed?
For 12 years my family and I lived in my parents’ home, caring for them until their deaths. My father, at 92 years old, was last to die. Eighteen months prior to his death I invited my younger sister to move in with us to help care for Dad because I was being assigned by my firm to its North Dakota branch which removed me from Florida for over a year.
During my absence, my sister, without our knowing, took Dad to an attorney to prepare a last will naming me as executor and herself as sole beneficiary of all his assets other than Dad’s home and its contents. Subsequently, she assisted Dad in securing a Reverse Mortgage on his home whereby he received a lump sum of $250,000. She deposited the money in a joint account in both my Dad’s and her names. Following the funeral, the bank account was closed by my sister, and I have not seen her since. Meanwhile, I am left with a mortgage on the family home owing $250,000. This has been the family home for more than 45 years with a current value of $526,000.
Regardless of my sister’s actions, I do not wish to give up on the family home, but the mortgage company will not allow me to continue payments. I have heard a lot of troubling things about Reverse Mortgages and am worried I can lose the home.
A: No mortgage company is required to speak to anyone other than the person who signs the mortgage. Understanding probate, most Reverse Mortgage companies will continue a dialogue with family members following someone’s death. To guarantee dialog, you must file probate. Named as the executor in your father’s will, by filing probate, the court will grant you the authority to take over the obligations of your father. Once appointed legally by the court, the mortgage company will notify you of the amount owed on the loan. Unless you have the cash to pay off the loan you will have to refinance the home with a Traditional loan.
Reverse Mortgages are available to seniors 62 years of age or older. Responsibility of paying off the loan is no different than paying off any type of mortgage. The primary difference between a Traditional Mortgage and a Reverse Mortgage is that a Traditional Mortgage requires you to pay back the loan monthly whereas with a Reverse Mortgage, repayment generally occurs within one year after you move out of the property or when you die. In other words, when your dad died, the entire mortgage amount became due and family members wishing to save the home must pay the entire amount of the outstanding mortgage. If they have insufficient funds, but wish to keep the property, after it is retitled into another’s name through probate, they will need to refinance the Reverse Mortgage to pay it off. Be aware, however, it is best to act quickly because interest accrues the entire time the loan remains outstanding so the balance keeps rising during this time.