If my parents got a reverse mortgage on their condo, when they both pass away is the estate responsible for paying it off?
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If my parents got a reverse mortgage on their condo, when they both pass away is the estate responsible for paying it off?
or can it just turn the condo over to the bank? What if more is owed on the reverse mortgage than the property is worth?
Asked on July 2, 2013 under Estate Planning, Florida
Answers:
M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney
Answered 10 years ago | Contributor
Yes, the loan must be paid off when they pass away. What remains is an asset of the estate to pass on to the beneficiaries. Generally there should not be the issue of a deficit (if there is more owed than there is value in the property left) since lenders protect themselves by lending only a portion of the value. The market would have to completely tank for the scenario you suggest. But if it did and with any deficiency, you could have the bank agree to a deed in lieu of foreclosure or a short sale both waiving the deficiency. Please speak with a financial planner in your area. Good luck.
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