A question I get from time to time is, can my children assume my reverse mortgage?
I’ve mentioned before that estate planning and reverse mortgages can often clash when it comes to rules.
Some conventional real estate loans and government real estate loans may have language in the note that may allow for loan assumptions, but most do not.
On a conventional loan you can move and rent out your home without an issue, you can keep the existing loan in place.
On an FHA real estate loan, the rules specifically state that the home must stay owner occupied for the duration of the loan as long as you are living there as your primary residence.
Most people don’t know that the HECM Reverse mortgage is in the family of FHA loans therefore, the loan must be paid off once the home is no longer your primary residence.
There are a few exceptions this rule, but far few in between.
Non – reverse mortgage FHA loans in the past have had assumption clauses in their notes making it possible however, the lender must approve first, there is an approval type of process before it can take place.
If a homeowner transfers ownership to another person, and that person starts making monthly payments on the loan, that can cause a due in payable event which could result in the loan being put into default.
An FHA reverse mortgage is not assumable to any party – even children.
Once the property is no longer the primary residence of the last living borrower listed (or possible non-borrowing spouse) on the loan, it must be paid off, a child may not stay or move into the property this also will result in a due and payable event.
I made a one – minute video cover covering more details on this issue.
If you have any questions on this issue or on how California reverse mortgages work, please feel free to call, email or leave your information on the below form and I will be happy to help!
Kind regards,
KW