Defaulting on a Reverse Mortgage?

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OK, this may seem like a strange question, but, the world’s a strange place so here goes…

My grandmother is currently living in a house that cannot be insured due to its proximity to the Gulf of Mexico.

Due to the current situation of the housing market, she is having great difficulty in selling the house and has recently considered a Reverse Mortgage.

I understand that this isn’t really the proper situation for that type of mortgage, but, would it be possible for her to get a lump sum payment, then purchase a new house from a relative with the proceeds of said mortgage?

I understand that this would trigger the immediate repayment of the loan, but how would the government treat the default? Would they foreclose on the old house?

Please let me know how this would work as she’s getting very frustrated with her current situation and as a college student, I really don’t have the funds to help her out!

Thanks!

2 Comments
  1. Reply
    lepr0kan
    April 30, 2011 at 12:10 am

    She won’t be able to get a reverse mortgage without insurance on the property. Plus if she did get insurance reverse mortgages do not pay in a lump sum they give a monthly amount.

  2. Reply
    Auntie Mame
    April 30, 2011 at 12:29 am

    If the house can’t be insured, she can’t get a Reverse Mortgage.

    If the house is insurable, for a person age 62, and house worth $ 200K, the lump sum would be between $ 138,932 and $ 87,183. Why so low? They want to be sure that they can sell the house for at least the amount they gave her, in case of foreclosure. But consider, she could sell her $ 200K house in days if she lowered her price to $ 160K and be money ahead as compared to a Reverse Mortgage.

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