When the last borrower dies, the loan generally becomes repayable by the deceased estate. The executor should contact the lender to confirm the payout and repayment timeframe. Beneficiaries may sell the home or repay the loan from other funds.
Question
What happens to the reverse mortgage when I die?
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Short answer
The detail
When the last borrower dies, the loan generally becomes repayable by the deceased estate. The executor should contact the lender to confirm the payout and repayment timeframe. Beneficiaries may sell the home or repay the loan from other funds.
When the last borrower dies, the debt becomes an obligation of the deceased estate.
The executor should contact the lender, obtain an updated payout figure and confirm the required repayment process.
The beneficiaries will generally have two broad options:
- Sell the property and repay the loan from the sale proceeds.
- Repay or refinance the reverse mortgage using other funds and retain the property.
After the loan and selling costs are paid, the remaining proceeds form part of the estate.
The beneficiaries do not simply inherit the original home free of the reverse mortgage. They inherit the estate’s remaining interest in the property after the secured debt has been dealt with.
The no-negative-equity protection generally means the lender cannot recover more than the property’s market value for protected Australian loans.
Repayment periods and any available extensions depend on the lender and contract. Estate planning should be completed before borrowing so that the executor knows who to contact and what the family intends to do.
Read more: Are Reverse Mortgages a Scam? We ask Reddit users.
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Related questions
Sources
Useful tool: try our projection calculator with your own example figures.
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