Future planning encompasses both your financial well-being and ensuring the care of your loved ones. This article is here to guide you if you’re pondering the implications for your heirs with a reverse mortgage. In the event of your passing, your heirs must consider responsibilities and options. Let’s explore what they need to do when you have a reverse mortgage and pass away.
Understanding Heir Responsibilities
When you have a reverse mortgage and you pass away, your heirs’ actions are determined by the nature of the reverse mortgage and the decisions they make. Here’s what they need to consider:
- Assessing the Loan Balance:
Upon your passing, your heirs must determine the outstanding loan balance on the reverse mortgage. This is usually the total of the borrowed funds, accrued interest, and any fees associated with the loan.
- Property Ownership:
If your heirs intend to keep the property, they have options to consider. They can either repay the loan using other assets, secure a new mortgage, or sell the property to settle the reverse mortgage.
- Selling the Property:
If your heirs decide to sell the property, they can use the proceeds from the sale to repay the reverse mortgage. Any remaining equity belongs to them, and they can use it as they see fit.
- FHA Insurance Coverage:
If the loan balance surpasses the property value, the Federal Housing Administration (FHA) insurance coverage protects your heirs. They won’t need to shoulder the responsibility for the disparity between the loan balance and the property value.
- Communication with Lender:
It’s important for your heirs to communicate with the lender promptly after your passing. They need to inform the lender about their intentions and discuss the steps they plan to take regarding the reverse mortgage.