A friend is acting as executor in an estate with a home on which there is a reverse mortgage. I am doing some research to help her out.
Anyone experienced how things work at death?
Looking back on a year of statement, what a lousy deal!
Yep, reverse mortgages trigger the need for repayment upon the death of the person who took it out. Here’s an article about it that may be of help. Personally, I agree that it’s generally a lousy deal–LOTS of up front expense and the heirs get a LOT less than if the property was sold outright and the person rented or retained a life estate.
I don’t post much, but signed in just to answer this… I just went through this in NY State. The loan is payable upon death. The one I had to work with was AAG and fortunately they were really good with me. They didn’t care who or how it was paid, just pay it. It took us 7 months to get it paid off. As long as I called them once a month and showed them that I was trying to get it paid, i.e. For Sale sign, realtor listing, loan papers in process, they left me alone for the most part. I can’t remember the exact number, but they will continue extending the time line up to 2 years? or maybe it was just 18 months. This loan had a clause that said when there was change in status of the loan, they had to come a do an inspection. That was another $500 added to the loan. If you ignore them or they get ticked off, I guess they can come and lock up the house, basic foreclosure, but faster I think. You can also let them take back the property and I was told that I could take only personal items from the house. They would let me know what they considered personal. When it was paid off, there were actually two companies involved and I had to get lien releases from both of them. AAG was just the middle man, so they had to sign off along with the actual mortgage company.
I was the executor of my mothers state. My sister, who lived with her, got a reverse mortgage. It was payable upon death. It was through Bank of America. We had 3 moths and could the get 3 month extensions up to a year to pay it back. At that point the house would becomes theirs.
I put the house, in a very desirable retirement community, up for sale within a month or two. We soon got an offer below asking, but I could not counter because my sister was still in the house and saying I was trying to " put her on the street." I turned down the offer with no counter. I also raised the price to slow down offers.
Over the next 9 months we got an offer to rent to buy and another offer to buy contingent upon selling their current house. But this was 6 1/2 years ago and we were still in the recession. Retirees could not sell their homes.
It turns out we had to turn the house over to BOA. And they were real jerks about the condition of the house when leaving. Nothing could be left in the house including drapes, blinds or any not built in shelves. We left a shelf in the garage and they failed our inspection. This meant things dragged on.
It would have been better for the estate had there been no reverse mortgage. It also would have been better for the estate if my mother did not die when she did. Couldn’t she have given us a few more years? Oh how I wish, and not for the better for the estate…
Reverse mortgages should never be done with an owner’s child living in the house - too many complications upon the death of the owners. I will most likely be dealing with this as my living parent has one on his home.
My brother and sister and I had an experience with our Mothers passing and she having a reverse mortgage. It was very helpful for her as it enabled her to live much more comfortably than she would have otherwise been able. Still obviously something that you would rather not do if you didn’t have to.
What was interesting in our Mothers case was that when they appraised her home the housing market was very strong and they valued her home disproportionately high in my opinion. At the time of her passing (two years ago) the housing market was significantly depressed. Basically what was owed to the bank on the house exceeded it’s market value by quite a bit. None of us had an interest in paying a much higher than market value to keep her home.
The house has sat for two years with no activity and is not yet on the market for sale.
Like Great kid, my patient had the same experience. Condo appraised high, so she gained $$$. It was a blessing to her kids. Patient now lives in an Assisted care facility.
Newspaper story about them here a few months ago. One case where the spouse was not on the mortgage and lost the house when her H died.
My father (mom died age 53) is 90 and lives in the 1000 SF ranch house they bought new 60 years ago. When he either dies or is incapacitated enough to not be carried out kicking and screaming it will get sold. He should have gone to a senior apartment a couple of years ago, has accused his kids of wanting to sell the house from under him (not a pleasant person, he is a stubborn old man …refused to let the stairs to the basement where the washer and dryer are be enclosed for safety- he could fall on the cement). That is a fixer house for a future young couple wanting a starter home! Selling it would cover expenses for a nursing home the rest of his life.
Good luck dealing with past decisions made and be careful with the fine print if considering one.
My late father-in-law suffered a series of heart attacks followed by a stroke, but he lived for 12 more years after these episodes. His condition was unknown at first, but it soon became clear that he needed either nursing home care or live-in care. They chose the latter, and took a reverse mortgage to allow them additional income to pay for a live-at-home caregiver, to assist him with personal care, getting in/out of bed, etc. as well as meals and light housework.
The reverse mortgage allowed them to stay in their own home, and enjoy their remaining years. When MIL passed away before FIL, DH and his siblings, all over the country, were relieved that “Poppa” had someone living there to support him. FIL lived one day short of a full year after MIL died.
A reverse mortgage doesn’t make sense for everyone’s situation, but as long as you go into them with your eyes open, they can be the right thing for many seniors. And the rules and terms can vary a lot by state.
I had heard somewhere that a reverse mortgage is worthwhile when it allows a senior 5 more years, otherwise the admin costs take too big a bite.
Upon death of my FIL, within a few months, his house was sold (actually to the brother of the caretaker) and the bank simply collected their share. The minimal remaining amount, after paying the bank and the real estate agent, who took a lower commission since there were no formal showings, was distributed to DH and his siblings in accordance with the will.