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Reverse Mortgages and Your Estate

Each year, thousands of homeowners obtain a reverse mortgage for their home to reap the benefits of their equity.  But how does this impact your ability to leave your home to your children when you pass away?  

If you have a Home Equity Conversion Mortgage (HECM), i.e. a reverse mortgage, your children will have to repay either the full loan balance or 95% of the home’s appraised value–whichever is less – at the time of your passing.  Upon the death of the homeowner or loan borrower, the loan becomes due and payable. Your children have 30-days from receiving the due and payable notice from the lender to buy the home, sell the home, or turn the home over to the lender to satisfy the debt. 

If your children want to sell or keep the home, you may want to consider leaving enough funds in your estate to pay off the loan balance. However, if there are no funds to pay off the balance, the home may need to be sold to repay the loan. If the balance owed on the loan is more than the home is worth, your children won’t have to pay the difference.

If you plan on leaving your home to your children, it’s important to evaluate the repayment options and speak with an attorney about creating an estate plan.  If you would like additional information, or are interested in an initial consultation regarding your estate, please contact Anne McMichael (mcmichael@ccrjlaw.com) or Jill Curry-Jahn (curry@ccrjlaw.com), or call 303-572-4200.  

Source – https://www.consumerfinance.gov

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