Buy a house with reverse mortgage?

Question

May have an opportunity to buy an off market house from an older gentleman. He mentioned his house has a reverse mortgage on it.

I don't know much at all about a reverse mortgage.

• who owns the house now? Him or the bank?

• is it possible to buy a house that has a reverse mortgage?

• what complications or watch outs do I need to know about when potentially buying a house with reverse mortgage?

• also, if someone is able to provide a quick synopsis of how a reverse mortgage works, that'd be awesome!

Thanks!

Nicholas

Account Closed · Answer

I bought a house with an existing reverse mortgage on it. It's still just a loan. The bank does not own the house. However, there is a clause in the agreement that if the owner dies or moves out of the house, the heirs sell the property and pay off the loan or the bank takes the home into foreclosure.

Now, in my situation, I paid the 94 year old owner his equity, let him stay in the house while he transitioned to his 65 year old daughter's home. There were no payments to make since it was a reverse mortgage. Pretty cool. The transition took  several months longer than expected. (It was a hoarder house.) Meanwhile, I was busy with a couple of other flips and when he moved, the house was vacant and a squatter moved in. The police were called, the bank was notified and the bank called the loan due.

I was in the postion to pay off the loan so I did.

But, that is the catch. You have to be in the position to pay off the loan if the bank calls the loan due.

Wayne Brooks · Answer

@Nicholas Morgan It’s the same as buying a house with any other loan, the loan balance gets paid off at closing.

Bill B. · Answer

He still owns the house.

The reverse mortgage “bank” can provide a payoff.

Does he have plans on where he’s going to live next? (Since that’s usually the reason for a reverse mortgage.)