When this happens, the first thing you need to do is contact the lender. Heirs get an initial 6 months to payoff the loan. Her lender will send out an approved appraiser within 30 days of being notified of her death. The amount that will be due to settle the reverse mortgage will be the lesser of the loan or 95% of the appraised market value of her house. One thing to note is that a reverse mortgage is a “non-recourse” mortgage. This means that if the appraised value is less than the loan balance, then lender cannot go after the heirs for the difference. So what happens next?

If you decide to sell the house, it must be listed for at least the appraised value. Adding an additional 5% to the sale price might help offset some of the costs.

If there is no equity in the house, you might just want to hand the keys back to the lender. This is called a “deed in lieu of foreclosure” and is a perfectly acceptable choice. If necessary, you can request a 90 day extension while trying to figure out what is the best path for you.

Dealing with the death of one’s Mother is never easy. You have to act somewhat quickly when a reverse mortgage is on the property, but with an extension, you can relieve some of the pressure when making the right decision for you.

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