Reverse Mortgage and Probate
So how do you handle a reverse mortgage and probate? First, be aware that when property is encumbered by a reverse mortgage and probate is filed, it may take longer for beneficiaries to receive the property proceeds. Furthermore, death of the deceased triggers the loan payoff of a reverse mortgage. The estate’s legal representative is responsible for making arrangements to pay the reverse mortgage and probate the estate. Once the reverse mortgage is paid in full, any remaining equity in the home can be transferred to beneficiaries. It should be noted, however, that no debt from the reverse mortgage will be passed to the estate beneficiaries or heirs.
After the death of a homeowner with a reverse mortgage, the estate representative only has a short amount of time to contact the lender. Most lenders will begin foreclosure proceedings soon after the homeowner has died. In most situations, if a probate has been filed and the bank is being cooperative, the estate representative may have 3-6 months to sell or refinance the property. Keep in mind that until the loan is paid, interest on the loan will continue to add to the loan balance. This will continue to reduce the amount of equity in the home.
Cheryl and Lisa’s mother passed away. Their mother, Eve, owned a home worth $400,000. Eve took out a reverse mortgage and received $100,000 in payments. She owed $120,000 on the reverse mortgage when she died. Eve had executed a will naming Cheryl and Lisa as beneficiaries of her home who were now faced with handling the reverse mortgage and probate proceedings. Cheryl and Lisa have basically two options. First, Cheryl and Lisa can sell the home and take the proceeds to pay the $120,000 loan balance. The net proceeds after sale would be equally split. Alternatively, as part of the California probate process they can transfer the home to themselves as co-owners. This would allow them to refinance the home to pay off the reverse mortgage before filing the Petition for Final Distribution.
If you are faced with a reverse mortgage and probate, don’t delay taking action! A People’s Choice can help you probate your loved one’s estate, even if there is a reverse mortgage on real property. Contact A People’s Choice for more information about our low-cost California probate services. Using our non-attorney probate services will save you thousands of dollars as compared to statutory fees charged by California attorneys. Call 800-747-2780 today!