When a reverse mortgage borrower passes away in California, the loan becomes due and must be paid off in full within the first six months of the homeowner’s death. Repaying the loan in such a short time frame can pose considerable stress if heirs don’t have the necessary funds.
Selling the property is one of the most common ways to repay the reverse mortgage loan by using the sale proceeds. However, this approach can often lead to emotional challenges since, for many heirs, the family home is not only a place to live, but also a lifetime of cherished memories.
The good news is that selling the home (or allowing the lender to foreclose) is not the only way to settle a reverse mortgage loan. There’s another go-to method for repaying a reverse mortgage loan for heirs who find it difficult to part with their family property, or need additional time to divide the trust or estate’s assets.
In this blog post, we’ll explore how third-party loans from private money lenders can provide a lifeline, allowing heirs to retain ownership of their home while still fulfilling their reverse mortgage debt obligations.
Reverse Mortgage Payoff Loan Explained
A reverse mortgage payoff loan is a short-term loan offered by private equity firms such as HCS Equity. This financial tool is designed to help homeowners repay an existing reverse mortgage loan without having to sell the property in order to meet the estate expenses.
When the homeowner dies, the heirs are responsible for repaying the remaining loan balance (which becomes due and payable within the first six months of the homeowner’s death). A reverse mortgage payoff loan can be particularly beneficial for heirs who wish to keep the property within the family.
Paying Off a Reverse Mortgage with a Private Loan from HCS Equity
If a reverse mortgage isn’t paid back within the specified timeline, the lender can initiate foreclosure. This means the heirs will lose ownership of the home because the lender will need to sell the property to repay the outstanding loan balance (including any accrued interest and fees) while the remaining property equity will be transferred to the heirs.
As mentioned above, if heirs want to keep the property, but need more time than the reverse mortgage lender allows (the six-month grace period) to properly administer the trust or estate, they will need an interim solution to pay off the reverse mortgage.
Since the property is typically in the decedent’s name (or in their now irrevocable trust), seeking financial help from traditional banks may not be possible. Therefore, the estate or trust will need to take out a new loan from a private reverse mortgage payoff lender, such as HCS Equity, to repay the reverse mortgage loan. HCS Equity loans provide the trust or estate enough time to find permanent financing, buy out other beneficiaries, or secure additional capital for home improvements to sell the home at a later date.
Depending on the reverse mortgage servicing firm and the specific circumstances of the homeowner’s estate, the loan approval process can take anywhere from a few days to a few weeks. The reverse mortgage payoff loan amount is determined based on the property equity. HCS Equity typically lends on a property with a loan-to-value ratio (LTV) up to 65%. Once approved, the estate can pay off the reverse mortgage in full with the funds received from the private loan.
Our reverse mortgage payoff loans are subject to competitive interest rates and flexible repayment terms (up to 1 year, but can extend the term if necessary). Moreover, we don’t require a personal guarantee as security in order for our loans to be approved. Our reverse mortgage payoff loans also feature interest-only payments and no prepayment penalties or minimum months of interest.
How to Guide: 6 Steps to Repaying Your Reverse Mortgage
- Consider your repayment options. You can either sell the home or obtain a reverse mortgage payoff loan to satisfy the reverse mortgage debt.
- Research private lenders. Since traditional lenders are hesitant to provide financial assistance for repaying a reverse mortgage, start researching for private lenders who offer reverse mortgage payoff loans.
- Assess the loan terms and interest rates. Once you’ve identified potential lenders, it’s time to assess your loan terms and interest rates.
- Complete the application process. Once you’ve applied, the lender will assess your eligibility based on your property equity.
- Get approved and receive loan proceeds. Once approved, the lender will provide the estate with the loan proceeds to pay off the reverse mortgage in full.
- Continue living in the property. A private reverse mortgage payoff loan allows you to retain home ownership and continue living in it.
If you’re left with a reverse mortgage and are facing difficulties in repaying it, seeking professional financial guidance is strongly recommended. With decades of experience, HCS Equity can help you determine if a reverse mortgage payoff loan is the right option for your specific situation when the time comes.
We’ll walk you through the reverse mortgage payoff process to ensure that all legal requirements are met, and the estate’s matters are handled appropriately.
Contact HCS Equity to obtain a reverse mortgage payoff loan and ensure a smooth process.