Click Fraud Protection

Reverse Mortgages and the Probate Estate Dilemma

  • By Antonlegal 19 September, 2012 no comments.

Reverse Mortgages and the Probate Estate Dilemma

We have all seen them, the commercials late at night, a stately gentleman, graying hair perfectly parted speaking of the virtues of a reverse mortgages and how they can benefit older Americans entering retirement. Once the pitch is completed the closing image is that of the typical American family surrounding grandma or grandpa on the porch enjoying what appears to be a beautiful day thanks the reverse mortgage.  The reality however is often very different.

What Is A Reverse Mortgage?

What is a reverse mortgage?  A reverse mortgage is a home equity loan that unlike a conventional loan disburses the monies borrowed to the borrower in monthly installments over a period of time. The reverse mortgage is secured by a deed of trust on the property for an amount which usually includes not only the money borrowed but also an additional amount sufficient to cover the interest payments on the loan until the borrower passes away. The reverse mortgage becomes due and payable to the lender when the borrower passes. Thus the borrower or their estate at the time of the borrower’s death may end up owing the reverse mortgage company a significantly larger amount of money than the borrower initially borrowed or received.  If the property is the principle residence of a least one surviving borrower the loan will not become due and payable until that surviving borrower passes as well.

What Options Are There For Probating A Reverse Mortgage?

Once the borrower passes their estate is typically given four options: One, the estate can elect to pay off the reverse mortgage with proceeds from the estate; Two, the estate can refinance out the reverse mortgage with a conventional loan, which in effect is paying off the reverse mortgage; Three, the estate can elect to sell the property, whereby the reverse mortgage will be satisfied from the proceeds of the sale and the balance of the equity will be paid to the estate; Four the estate can issue a deed in lieu of foreclosure to the lender to avoid the lender from initiating foreclosure proceeding against the property. 

Typically, the lender will make a request of the estate shortly after the borrower has passed and will give the estate 30 days to elect which of these options it wishes to pursue or face foreclosure. A far cry from the beautiful day the commercial depicts.
There are benefits to a reverse mortgage. The borrower has the tax free use of their home equity as long as they continue to live in their home. However,  that’s right if you have to go to a nursing home or assisted care facility and cannot return to your home because you require constant care, that may trigger repayment of the reverse mortgage.  While the money is tax free, as the old saying goes nothing in this life is really free. The reason the money is tax free is because it is your equity in your home, which you already paid taxes on when you earned it and paid your mortgage to accumulate equity in the Property.
While withdrawing the equity from your residence while you are alive through a reverse mortgage can be a way an effective means of passing a portion of your estate to your loved ones while you are alive without tax penalties, the costs to your estate in the form of interest on the reverse mortgage loan and related fees and obstacles the reverse mortgage process involves, often exceed the benefit for most Americans.

It’s important to remember that in order to qualify for a reverse mortgage the lender will often require that your property be free and clear of any other lien in order for your property to qualify as security for a reverse mortgage. In some instances the lender may wrap the balance of your existing mortgage into the balance of your reverse mortgage. However, as they say, “the devil is in the details”. A reverse mortgage is typically not for the full value of your home. The amount of loan that you will qualify for is based on the lowest selling margins for your areas.

For example, if your home is worth $431,000 in today’s market, the value limit the lender places on the property may reduce your home’s value for the purpose of computing the reverse mortgage to $362,790 which would result in loan principal limit of approximately $259,395. This would be the absolute maximum the reverse mortgage lender would lend on a house worth $431,000. Remember the reverse mortgage lender is going to subtract all of the lender’s fees upfront, let’s say approximate, $17,125 to give you $236,621 as your net principal limit. However, when the reverse mortgage company records their deed of trust on your property, they are going to record it for the $362,790 amount. Thus, your property is significantly more encumbered than the amount of money the borrower received.  These assumptions are based on the borrower taking monthly payments; the situation is even direr if the borrower elects to take a lump sum payment.

So while the reverse mortgage commercial may seem enticing, a way to provide for your golden years, beware, that the sunny day the commercial promises may cause more agony and trouble for your heirs then you ever intended.

For more information regarding reverse mortgages and the probate law please contact Antonoplos & Associates at 202-803-5676 or

  • I did a simple will, power of attorney, and medical power of attorney with Peter Antonoplos, and could not have been happier. The process was easy and straightforward, while Peter and his team were paragons of professionalism.
    —Matt K.
  • I was referred to Antonoplos and Associates when I was suddenly confronted with a host of complex legal matters that needed resolution. The legal issues were far reaching, and included, but were not limited to, probate and real estate. Mr. Antonoplos is particularly skillful in analyzing a situation from every aspect, and then approaching in a strategic, calculated manner. I feel confident recommending Antonoplos and Associates to friends and family and would certainly use them again in the future.
  • Peter and Valerie worked on my real estate case. Although the case was unfortunate they kept me in the know every step of the way. They are very personable. Whether I emailed or called I was helped. I would definitely use this firm again and I recommend them at the highest possible level.
    —S H
  • The Antonoplos firm handled work on my trust for me and did outstanding job. Friends recommended and I am very happy I chose them. They are great folks. Everyone I worked with was so nice and conscientious. I had put this off for years because I thought it would be difficult and a bunch of work, but they really made it easy. I thought it was a great value too. I will definitely work with them for anything I need in the future and recommend them to my friends.
  • Terrific real estate attorneys. Mr. Antonoplos and his team really know their stuff. My wife and I bought a house from a developer and right after settlement we experienced a bunch of problems with the construction and foundation of the house. We called Antonoplos & Associates and made an appointment for a Monday morning. We met we Mr. Antonoplos, who clearly knows this a area of the law and he explained our options to us. We filed suit and he kicked the other side's butt. We were really pleased with the attention his firm gave us, and how everyone on his team went above and beyond to make sure that we understood what was happening in our case and they were able to get us a very favorable settlement from the builder. I would definitely call these guys again if I had a real estate problem.
  • I am a real estate professional and have worked with several attorneys in various capacities. I have witnessed the law firm of Antonoplos & Associates deliver first rate results for their clients in matters concerning wills, probate, real estate, etc. I would highly recommend this firm to anyone seeking outstanding legal services.
  • Peter is a great estate planning resource. I am very comfortable referring my clients to him. His knowledge base and ability to understand the needs of my clients makes him a real value to me and to my clients. I am particularly impressed with his ability to communicate and educate people about complex legal issues in a simple and straight forward way. He is a wonderful resource and a true professional.

  • Peter is a pleasure to work with. He is a knowledgeable real estate attorney who has a good command of the issues facing his client. He was responsive to my questions and delivered as promised in a cost effective and timely manner. I would recommend Peter to friends and coworkers for their legal matters. He has handled several transactions for me with excellent results.

  • Peter is a fine lawyer, energetic and responsive. He has a good background and is familiar with many aspects of real estate law.

    My experience with him was successful and I have recommended him to other clients before.

  • Peter is a rock solid lawyer with impressive knowledge of the law, enviable negotiating skills, and a confident attitude. His results speak for themselves: in a landlord-tenant dispute, he got us a settlement for 60 cents on the dollar and helped us avoid expensive litigation. We weren’t familiar with the relevant laws and procedures, and were pleased with how he explained the proceedings and advised us on our legal options. We would definitely go back, and would recommend his services to friends and business associates. He’s the kind of guy you want to have in your corner.

  • I called Mr. Antonoplos for help with two legal charges in different states (Maryland & Virginia.) He immediately started working and came up with a great plan. Thanks to his well thought out strategies, I am looking at a positive outcome in both court cases.

    I would highly recommend this attorney.

  • Peter is a great attorney. He took the time to meet with me to discuss my goals and objects and to understand my needs when it came to my estate plan. Peter really took the time to make sure that I understood all of the documents and make the process as quick and painless as possible.
  • Peter is the highest energy person I know. His zeal and expertise in a wide range of divergent legal topics is the best I have come across in all my years of working with top legal counsel. I retained Peter Antonoplos to guide my start-up small business, Linkedin Profile Service. I have a great respect for his legal capacity and attention to detail.


No Comment


Contact Us