How Can I Change Title To Property In A Living Trust
Changing the title to real property in a living trust requires legal authorization. You cannot attempt to change title to property, in or out of a living trust, unless you are either the owner of the property or the trustee charged with managing the property. However, if you do have authorization, there are a few different circumstances in which you might legally change title to property in a living trust.
What Is A Beneficiary Deed Of Trust
A beneficiary deed otherwise known as a TOD deed refers to a specific type of deed that would allow for the transfer of ownership outside of private and comes in handy in cases relating to a reverse mortgage.
This deed is simply an interest conveyor in the actual property that is revocable, and it comes into effect once the grantor dies or in the case of multiple grantors, the death of the last surviving grantor.
It is mainly used to avoid probate but may also be effective for excluding a particular property from a private estate. When used in conjunction with a reverse mortgage, in addition to allowing you to remove a property from probate, it also grants the beneficiary instant access to the property. This way, they would be able to move on with the process of either sales or transfer of ownership with the lender or servicer.
Transferring A House With A Reverse Mortgage Into Your New Living Trust
If you already have a reverse mortgage on your home at the time you create your living trust, you can transfer it into your trust using the real estate powers granted to you as trustee of your trust. It is important to notify your lender before you initiate a transfer. Your lender will want to verify that your trust agreement meets the same requirements it would need to meet if you were a trustee getting a reverse mortgage on a home that is already in your living trust. For example, the lender will confirm that all current beneficiaries named in the trust have the right to live in the home indefinitely. Your lender may have additional stipulations, such as requiring the trust to formally assume the borrower’s obligation to repay the debt to avoid difficulty in enforcing the mortgage, so prompt notification is essential.
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Cautions About Reverse Mortgages
Reverse mortgages are more expensive to obtain than conventional mortgages. When you see ads about no cost reverse mortgages, investigate further: you are paying a lot for the reverse mortgage, but those costs are added to the loan itself and reduces money available to you. In fact closing costs for reverse mortgages can be double those for a conventional mortgages. For example, on a $200,000 home expect to pay close to $10,000 for closing costs. That includes the mortgage insurance premium payable up front and required by law, and the origination fee paid to the lender. Compare this to a typical home equity loan where you have to pay at least interest each month but closing costs are much lower.
Another overlooked problem is that even though you wont have to start paying back the reverse mortgage loan during your lifetime, you could still lose your house to a tax foreclosure or be unable to stay in your home if you cant pay property insurance premiums. Be sure you have income or reserves available to continue paying these expenses, or you wont be able to keep your home and will have to move.
Lenders cant come back against the estate or heirs to collect if the house doesnt sell for enough to cover the loan plus the accrued interest over the years. That means the heirs could simply walk away from the reverse mortgage and let the bank foreclose the property.
How Do You Pay Back A Reverse Mortgage
If you die before youve sold your home, those you leave behind are stuck with two options. They can either pay off the full reverse mortgage and all the interest thats piled up over the years, or surrender your house to the bank.
So, it might seem like a reverse mortgage is a helpful cash-flow option for people in their retirement, but these mortgages put seniors and their heirs at financial risk.
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How A Reverse Mortgage Works
Before getting a reverse mortgage, you must first pay off and close any outstanding loans or lines of credit that are secured by your home. These can include a mortgage and a home equity line of credit . You can use the money you get from a reverse mortgage to do this.
You can use the remainder of the loan for anything you wish, such as to:
- pay for home repairs or improvements
- help with regular bills
- cover healthcare expenses
- repay debts
A reverse mortgage may limit other financing options secured by your home. You may not be able to take out a HELOC or similar products.
You may be able to get the money from your loan by:
- taking the money as a one-time lump sum
- taking some of the money up front and taking the rest over time
Ask your lender what payment options they offer for a reverse mortgage. Also ask whether there are any restrictions or fees.
How To Avoid Reverse Mortgage Scams
As you shop for a reverse mortgage and consider your options, be on the lookout for two of the most common reverse mortgage scams:
- Contractor loans Some contractors will try to convince you to get a reverse mortgage when touting home improvement services.
- Veteran loans The U.S. Department of Veterans Affairs doesnt provide reverse mortgages, but you may see ads promising special deals for veterans, such as a fee-free reverse mortgage to attract borrowers.
The best way to avoid a reverse mortgage scam is to be aware and vigilant. If an individual or company is pressuring you to sign a contract, for example, its likely a red flag.
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A Trust And A Will Difference
A trust differs from a will in that a will does not go into effect until after the grantor passes meanwhile, trusts become active as soon as they are created. While a trust is typically more costly than a will, they are often preferred because they offer more control over assets and avoid probate. The probate process consists of a court proceeding during which assets are distributed to the predetermined beneficiaries. Avoiding this process allows for much faster distributions of assets and avoids proceeds for probate court from being taken from the assets/estate. And one of the ways to avoid the probate process is via a beneficiary deed of trust.
How Heirs Should Handle A Reverse Mortgage After Death
I’m constantly hearing from heirs of reverse mortgage holders who are wondering what they should do now that the last borrower on the loan has passed or had to move to assisted living. Many heirs have no idea what their options or obligations are or how long they must do them.
If you have a reverse mortgage or have a family member who has a reverse mortgage, you need to arm yourself with this information. Even if you or your relative is not ready to move out of their reverse mortgaged property now, this can save you or your family a lot of grief later.
Do These Things Now Before the Borrower Leaves the Home
The loan becomes due and payable when the last original borrower permanently leaves the property. There are a lot of things you can do before the mortgage holder leaves the home to help make the process smoother later.
Check with your estate attorney, but if your heir is already on the title before you pass or it becomes a matter of a trust change and not a probation, you may be able to eliminate a huge delay for them when settling the property. It may still require a probation action, but your attorney will advise you on that. Your heirs cannot sell or take out a new loan unless they hold title to the home.
Reverse mortgage borrowers should also make sure that your heirs know where you keep your reverse mortgage statements. They will need to access them later.
Heirs Should Act Deliberately But Without Delay
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The Borrower No Longer Uses The Home As A Principal Residence
With a HECM, if the property ceases to be the principal residence of the borrower for reasons other than death and the property is not the principal residence of at least one other borrower, the loan becomes due and payable. To resolve the debt, you can correct the matter, pay the balance in full, sell the home for the lesser of the balance or 95% of the appraised value and put the proceeds toward paying off the loan, or complete a deed in lieu of foreclosure. Or else, the lender will foreclose.
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Alternatives To An Irrevocable Trust
Other trusts are also will substitutes. If your house is putinto a revocable trust, the home transfer avoids the time and cost of probate,and your beneficiaries have immediate access to the house. There are severalother strategies to avert probate, including looking at your titlevesting options.
Or you might consider:
- A Revocable Trust. Create a revocable trustto pass a home to non-spouse beneficiaries, and you can take that asset back ifnecessary. Revocable trusts ultimately bypass probate yet stay within theowners control, in the owners estate, and under the owners social securitynumber throughout life. They can hold assets for a child or children, anddistribute their value in increments, as young adults reach the specified ages.
- A Life Estate. As a life tenant,an owner can live at home for life, then pass a beneficiary the remainder interestin the property. By passing from one resident owner to the next in the form ofa remainder, the home circumvents probate. The title has both names on it, butonly one has the right to live in it at a time.
- An Enhanced Life Estate Deed. Some statesallow enhanced lifeestate deeds, also called lady bird deeds. These arerevocable. They enable their life tenants to sell or take loans out on theproperty if they so choose, change the remainder beneficiary, or take back theinterest.
Can You Put A Home That Has A Mortgage In A Family Trust
Putting your home in a trust keeps your most valuable asset out of probate court that can take up to a year and require your heirs to spend their vacation days tied up in hearings. When you have a mortgage on the home you want to place in a trust, it’s important to notify your lender first to make sure your trust contains all the necessary ingredients to satisfy their standards. Otherwise, you could end up triggering your note’s due-on-sale clause.
Yes, you can put a home that has a mortgage into a family trust. However, the crucial first step is to contact your lender to determine its requirements.
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Can A Family Member Be Added To A Reverse Mortgage
Can a Family Member Be Added to a Reverse Mortgage?
People seem to enjoy making additions of one sort or another. Homeowners might add an extra bedroom to accommodate visiting in-laws. Golfers might add a solo player to complete a foursome. Or magicians might add a routine to improve their act.
Unfortunately, however, you cant add a family member to an existing reverse mortgage. Lets look at some specific questions and scenarios to further illustrate this point.
Who Pays My Property Insurance And Taxes After I Get A Reverse Mortgage
As the homeowner, you will still be responsible for maintaining your property insurance and taxes. This may be different than a traditional mortgage you have had in the past, for which property insurance and taxes are often included in the monthly payment and are remitted by your servicer. However, based on the results of a financial fitness test, you may be required to have a set-aside account containing proceeds from your reverse mortgage that have been set aside for payment of your property insurance and taxes. If this is the case, you should be notified by your lender and your lender would be responsible for ensuring that timely payments are made toward your property insurance and taxes.
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Am I Eligible For A Reverse Mortgage
In order to be eligible for a reverse mortgage, typically you must:
- Own your home
- Be at least 60 years of age
- Live in your home for more than half of the year
- Have a single-family home, a 1- to 4-unit building or a federally-approved condominium or planned unit development
- Have no liens on your home or qualify for a large enough cash advance from the reverse mortgage to pay off any existing liens
- If your home needs physical repairs to qualify for a reverse mortgage, qualify for a large enough cash advance from the reverse mortgage to pay for the cost of repairs
Your Options With A Reverse Mortgage
Sell the Home after Death
Lets say your house is worth $300,000. At the time of your death, the balance on the reverse mortgage is $100,000.
When your personal representative sells your house, there will be equity to gain. One-hundred-thousand-dollars will be used to pay off the reverse mortgage, and the remainder of the equity $200,000 goes to your heirs.
As you can see, a reverse mortgage is really no different than a loan against the house, and it really wont affect your estate plan.
Limitations with a Sale
Whether the personal representative can sell the house depends on the contract of the reverse mortgage. So its important to closely review the reverse mortgage contract.
Place the Home in a Trust
If you consider placing the home into a trust, you could probably think about a revocable trust.
If you are weighing an irrevocable trust as an option, you should be very careful. There are very specific rules surrounding irrevocable trusts.
Reverse Mortgage Company Review
The company that gave you the reverse mortgage will review the irrevocable trust. So, we do not suggest you transfer your home into an irrevocable trust without first consulting an attorney.
Gift the Home after Death
You could potentially gift the house through a joint tendency upon your death. And, if the property is in your will, it transfer that way.
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What Are The Costs Of A Reverse Mortgage
Home equity conversion mortgages, the most common type of reverse mortgage, bring a number of fees and costs. To start with, all borrowers taking out a HECM reverse mortgage loan must undergo counseling, which the borrower pays for, from a HUD-approved reverse mortgage counselor. Costs for this counseling will vary. Other fees include origination fees, closing costs, and mortgage insurance premiums, as well as servicing fees to the lender for such costs as sending account statements, distributing loan proceeds, and making certain that you keep up with the loan requirements.
How Much A Reverse Mortgage Can Cost
Costs associated with a reverse mortgage may include:
- a higher interest rate than for a traditional mortgage
- a home appraisal fee
- a prepayment penalty if you pay off your reverse mortgage before it is due
- legal fees for closing costs or independent legal advice
The costs will vary depending on your lender. Some fees may be added to the balance of your loan. You may have to pay for others up front.
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More About Reverse Mortgages
What details of the Equitable Bank Reverse Mortgage can I compare with other options?
Why reverse mortgage prepayment charges matter
Need retirement funds? Youre not alone.
Where can I get an Equitable Bank Reverse Mortgage?
Although Equitable Bank is a Schedule I Canadian Banklike RBC, TD and Scotiabankits different from its peers in many ways.
One important distinction is that youll never see an Equitable Bank brick-and-mortar branch, as the Banks branding states we would rather build your savings than build bank branches. Instead, Equitable Bank offers its residential lending products through many of the 15,000+ mortgage brokers operating across Canada. If youre interested in learning more about mortgage brokers, check out Mortgage Professionals Canadas website. This industry association represents about 11,500 mortgage broker members and is involved in many important aspects of Canadian residential real estate. Read more
Making sense of reverse mortgage rates
When it comes to any lending product, the mind commonly goes to two places how much will I get and how much will it cost me?
This post will focus on the how much will it cost me part, since interest rates for reverse mortgages are often misunderstood, especially when compared to other lending solutions. Read more.
Could a reverse mortgage work for you?
Reverse Mortgages Impact On Other Government Benefits
Reverse mortgage payments are not counted as income if they are spent on care in the same month as they are received.
As most elderly persons receive multiple benefits from the federal government, one should not consider a reverse mortgage independent of its impact on other benefits. Fortunately, the most common benefits, including Medicare and Social Security, are not impacted in any way by a reverse mortgage. However, Supplemental Security Income, Medicaid, and Veterans Pension eligibility may be affected. These vary state-by-state. But generally speaking, reverse mortgage payments are not counted as income, as long as they are spent in the same month as they are received. However, if the funds are allowed to accumulate month over month, they could push ones resources over the allowable limits.
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