16 Nov What happens to mom’s reverse mortgage if she dies?
Q. I just found out my mother put a reverse mortgage on her house. I live with her. Would I have to move out if she dies? She is the only person on the deed and I’m her only beneficiary.
— Helping out
A. We’re glad you found out about the reverse mortgage so you can understand the consequences.
Keep in mind that each reverse mortgage is different, but we can give you a general idea of how they work.
A reverse mortgage can be taken out in a lump sum or your mom could have decided to receive monthly payouts, said Steven Gallo, a certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.
“Either way, the mortgage company will have a first lien on the property for the amount it has given your mother plus accrued interest,” Gallo said.
Upon your mother’s passing, the mortgage becomes due and you would have to pay off the mortgage if you decided that you wanted to keep the house,” Gallo said. “You would need to take out a new mortgage in your name for the amount owed or come up with the cash from some other source.”
Most reverse mortgages are due within 30 days of the death of the borrower, but 90 day extensions may be granted, Gallo said.
“You would not be able to stay in the house without paying off the reverse mortgage,” Gallo said.
We recommend you review the legal documents for the mortgage so you can see exactly what your mother agreed to when she signed the documents.
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This story was originally published on Nov. 16, 2020.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.