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My dad has a reverse mortgage on his home that i grew up on. In the event that he passes away, i understand that his home will more then likely be sold to repay that reverse mortgage. Is it possible for me to purchase his home as a buyer? If so, are there additional fees that are applied to the cost due to it being on a reverse mortgage? Is the home sold for the appraised value like normal or is it sold with the remaining loan amount due?

So it sounds like i can purchace the home for full value PLUS the amount he had paid to him? Is this correct?

6 Thoughts on can i purchase my dads reverse mortgage home?
  1. Reply
    February 16, 2014 at 11:52 am

    There are extreme fees to pay if you back out of a reverse mortgage.
    Not to mention, you’ll have to pay back everything they paid your dad.

    I’m disspointed on all these commercials that make reverse mortgages sound so good.
    When in fact, it is one of the worst financial decisions a person can make.
    I would consider letting him keep his reverse mortgage, and then buy the house when it goes in the market many years from now.

    Research – breaking the reverse mortgage contract fees.
    The house will be sold at appraised value or higher when he passes.

  2. Reply
    February 16, 2014 at 12:42 pm

    SURE you can purchase the home now or after your father’s passing.
    Whenever you purchase the home, his mortgage is paid off in full.
    Whenever you buy any house, the existing mortgage is paid off, so that you get clear title.
    Any seller gets what is left after paying off their mortgages and closing fees.

  3. Reply
    February 16, 2014 at 1:30 pm

    use your noodle; you get zip for free.

    start the the loan process now. See how much you might have to come out of pocket…if at all.

    a RE mortgage costs no more to prepare than any other……….and LENDERS create
    them so there is no absolute rule to them.

  4. Reply
    February 16, 2014 at 1:41 pm

    Absolutely, but you should find out what the balance is on the loan first from a statement that he received or by calling the servicer.
    If teh balance is less than the value of the home, then you may only need to come up with that and work out the details of the purchase with the estate.
    If the balance is more than the value of the home, you may still be entitled to purchase the home for fair market value and the lender’s insurance from the Federal Housing Authority will fill in the rest. This might get tricky because you may be one of the people who actually own the property as an heir.

  5. Reply
    February 16, 2014 at 2:16 pm

    The reverse mortgage can be paid off at any time, with a new loan, whether it is a purchase by you or someone else, or a refinance of the current loan by your dad, or even by life insurance proceeds.

    If your father chooses to stay in the home, the reverse mortgage loan becomes due and payable when:

    1. The Property ceases to be the principal residence of a Borrower for reasons other than death
    and the Property is not the principal residence of at least one other Borrower;

    2. For a period of longer than 12 consecutive months, a Borrower fails to physically occupy the
    Property because of physical or mental illness and the Property is not the principal residence of
    at least one other Borrower; or

    3. An obligation of the Borrower under the Security Instrument is not performed ( paying taxes and insurance, and maintaining the property ).

    It can be paid off by the sale of the home or by someone in the family paying it off. Even if the balance of the loan is higher than the value of the home, the payoff cannot exceed the value of the home. There will be many of these that are paid off for less than full value when the loans become due. That is why there is upfront mortgage insurance on the loans, to create a fund to make up for these potential shortfalls.

    There would be no other special fees owed by a borrower paying off a reverse mortgage with a new loan other than the normal costs associated with the new loan.

  6. Reply
    February 16, 2014 at 2:24 pm

    If you want to purchase the home now, you could actually pay the outstanding balance of the loan as the purchase price. For example, if his home is worth $ 100K and he has a $ 50K reverse mortgage (including all accrued interest and fees), there’s nothing that would prohibit your dad from selling you the home for $ 50K. All the bank is worried about is getting their $ 50K back. Of course, in that example, your dad would get $ 0.

    If you’re talking about when you inherit the home, its basically the same issue. When your dad dies, if he owes $ 50K on the reverse mortgage, you would have the option of either refinancing the home with a $ 50K mortgage, paying the bank $ 50K in cash or selling the home and giving the bank the first $ 50K. In any event, as the heir you have control over the disposition of the property. The only limitation is that you would have to do something within 12 months or the bank may be able to repossess. After all, you can’t expect them to wait around forever for you to make a decision. Good luck!

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