Parents passed and the home is free and clear. The executor was allowed to live in home for 5 years then has to buy or sell so remaining siblings get their share. If after year 5 can all siblings do a quit claim deed passing ownership to them and then take out a reverse mortgage to pay everyone their fair share of estate?By Leslie on 02.01.2019
If the person living in the home was on title and both the home and that individual met the requirements for the loan (income, credit, age, etc), she can get the reverse mortgage then use the funds for whatever purpose she chooses. My Suggestion to you though if you determine this is the way you want to proceed is for the other siblings to consider getting together and granting the property to the sibling that will retain ownership while preparing a Note and recording a Deed of Trust for the amount owed to the other siblings in advance so that the reverse mortgage may be taken out in order to pay off the existing loan.
In this manner, the siblings would be paid from the loan proceeds at closing and the full amount of the reverse mortgage would be available at that time. If the property is free and clear at the time the reverse mortgage is originated, HUD will only allow 60% of the Principal Limit (the eligible loan funds) to be taken at the start of the loan. However, If the funds are to be used to pay off an existing loan, the full loan amount is available from the start. Also, if all the names of all siblings are still on the title to the property at the time the loan begins, each one would have to attend the counseling as well. It is so much cleaner if the siblings can deed the home to the one who will be living in the property with a Note and Deed that would be paid at the close of the reverse mortgage.
There are a couple of things I caution you on though. Firstly, you all must trust one another that the sibling living in the home will in fact complete the loan! I suggest you obtain legal counsel and you let the attorney set up the financing so that if the reverse mortgage is never completed, the loan becomes due within a set time period so that everyone is protected. We never know what can happen and accidents, death, other family members, etc. all have a way of spoiling the best laid plans.
Next, make sure that the funds that your sibling who will reside in the home will receive from the reverse mortgage will be adequate to meet all your needs. The reverse mortgage will only supply 50% or maybe even less of the value of the home depending on the age of the individual and if there are 5 siblings splitting the home equally, the reverse mortgage will not give you 80% of the home’s value (the remaining 4 siblings’ shares with an equal division). Make sure the expected loan proceeds will meet your needs before you build your plan using this as your ultimate end.