Reverse Mortgage Upon Selling

Added March 23, 2009 by Ilyce R. Glink

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Summary: A reverse mortgage is a loan against the property. When the property is sold, the reverse mortgage is paid off from the proceeds. The lender doesn’t usually acquire equity in a reverse mortgage.

Q: How does the Circle Lending private reverse mortgage arrangement affect inheritance of the property after the owner dies or moves out permanently?

I've always been told it is better to inherit property so you get the stepped-up basis as of the date of death, but if you acquire equity in the property through the reverse mortgage, does that mean you are already an owner?

A: I don't know what Circle Lending is, and I don't know what kind of paperwork the owner you are referring to signed with them.

Typically, a reverse mortgage is a loan against the property. When the property is sold, the loan is paid off from the proceeds. It doesn't directly affect an inheritance. The lender doesn't generally acquire equity in a reverse mortgage. It is simply a loan that is paid off.

Hope this helps.

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