I am confused with how to pay off my parent’s Reverse Mortgage. I see references to refinancing the loan, how do I do that? The home is in a Trust and was given to me; I have the Cert of Trust & Authority, etc… The mortgage company made no mention of transferring title, only asked if I intended to pay it off. So, do I pursue a traditional home mortgage and basically buy back the home? Or am I supposed to have the Title transferred and then seek a refinance? I cannot find any Senior Real Estate Specialists in my area.
A senior real estate specialist comes in handy when you are selling the home and you need someone to help you arrange for an estate sale and to help tie up loose ends you may not have considered.
If you are keeping the home
If you plan to keep the home, there is no need to contact a real estate specialist unless you are sure and just want their opinion of the possible sales price to help you make a decision.
Any real estate specialist can also give you a good idea of the value of the home and you can compare that to the amount owed to determine what your financing needs will be. Once you have decided to keep the home, you have a whole different set of goals to accomplish.
Thank bank doesn’t own the home
You are not “buying back” the home, the bank does not own it. If the title is still in the name of the trust and you are the successor beneficiary and trustee with power to borrow against the property, you may be able to get a new loan now.
The trust may be written so that once the original beneficiary(ies) is/are no longer living; the trust must be liquidated but you should check with an estate attorney for guidance there. I cannot tell you what you must do to stay in compliance with the terms of the trust, but I can tell you that the reverse mortgage is now due and payable.
The reverse mortgage lender is asking you what you intend to do because that will determine what they will do next. If you intend to keep the home, the loan must be repaid by you either with funds available to you or by taking out a new loan in your name.
Refinancing loan into your name
That is completely your call but if you intend to take out a new loan in your name, you must have title in your name or in the name of a trust that a lender will accept to lend to you. I would suggest that you contact a lender as soon as possible so that they may also review the title/trust to advise you if you need to take any further steps to be eligible for your new financing.
Remember, as the heir, you have the right to repay the loan at the amount owed or 95% of the current market value, whichever is less so if the amount owed is higher than the value of the property, you will be able to repay the loan in full for a lesser amount (95% of the appraised value). This is one of the reasons the lender asks for your plans. They now know they need to order an appraisal.
So to make a long story short, you need to contact a traditional lender to see what they will require for your title and act accordingly. You may or may not need to probate the property and I cannot advise you there so it probably would be a good idea to make a call to your parent’s attorney who set up the trust if they are still in business and discuss with them.
If the trust was set up a long time ago, many times the attorney has already retired, and you may need to check with another attorney so don’t wait for the last moment. The answers you get on the equity in the property, the need or not to probate the property and whether the trust is ok for the title for the new loan will dictate what you must do to close your new loan and pay off the reverse mortgage that is now due and payable.
If you are planning to sell the home
If you change your mind and decide to sell the home, it changes things a bit but you still need to be sure that the trust gives you the right to sell the property upon the passing of the original beneficiary(ies)/trustee or you may still need to go through probate or have the title changed in order to sell the property.
That is why a trip or call to an attorney is a good idea from the start, so you know exactly what you need to do.