Real Estate Investor · Member since 2010 · 2 posts · 0 votes
A lady called me with a nice house in a nice neighborhood that she wants to sell for what she owes which is $108k, and it is worth $150k. It needs no repairs, since her son is one of my best contractors who told her to call me.
She is in her early 80's, and she and her husband took out a reverse mortgage around 1993. She received monthly payments for years, but they eventually stopped a few years ago.
Her husband died 6 years ago, and the house is too large for her to maintain by herself (keep clean, cut the grass, utility bills, etc.). She wants to rent a small house with a small yard.
I mentioned that I might be able to help her with the house she no longer wants, and could likely help her find a house to rent.
Admittedly, I don't know much about Reverse Mortgages, but it seems like I would be buying a beautiful house subject to a mortgage with no monthly payments, but a balloon when she dies.
Couldn't I just buy a term life insurance policy on her, and use the proceeds to pay off the mortgage when she dies? Surely, the life insurance premiums would be a good tradeoff if I am receiving a "free" $150,000 house.
I was reading the recorded documents for the property and this is what the mortgage says
9. Grounds for Acceleration of Debt
(a) Due and Payable. Lender may require immediate payment in full of all sums secured by this Security Instrument if:
(i) A Borrower dies and the Property is not the principal residence of at least one surviving Borrower; or
(ii) All of a Borrower's title in the Property (or his or her beneficial interest in a trust owning all or part of the Property) is sold or otherwise transferred an no other Borrower retains (a) title to the Property in fee simple, (b) a leasehold under a lease for less than 99 years which is renewable or a lease having a remaining period of not less than 50 years beyond the date of the 100th birthday of the youngest Borrower, or (c) a life estate in the Property (or a beneficial interest in a trust with such an interest in the Property).
(b) Due and Payable with Secretary Approval. Lender may require immediate payment in full of all sums secured by this Security Instrument, upon approval by an authorized representative of the Secretary, if:
(i) 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; or
(ii) For a period of longer than twelve (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
(iii) An obligation of the Borrower under this Security Instrument is not performed.
(c) Notice to Lender. Borrower shall notify Lender whenever any of the events listed in subparagraphs (a) and (b) of this Paragraph 9(a)(ii) or (b) occur.
(d) Notice to Secretary and Borrower. Lender shall notify the Secretary and Borrower whenever the loan becomes due and payable under this Paragraph 9(a)(ii) and (b): Lender shall not have the right to commence foreclosure until Borrower has had thirty (30) days after notice to either:
(i) Correct the matter which resulted in the Securty Instrument coming due and payable; or
(ii) Pay the balance in full; or
(iii) Sell the Property for the lesser of the balance or 95% of the appraised value and apply the net proceeds of the sale toward the balance; or
(iv) Provide the Lender with a deed in lieu of foreclosure
(e) Trusts. Conveyance of a Borrower's interst in the Property to a trust which meets the requirements of the Secretary, or conveyance of a trust's interest in the Property to a Borrower, shall not be considered a conveyance for purposes of this Paragraph. A trust shall not be considered an occupant or be considered as having a principal residence for purposes of this Paragraph 9.