The reverse mortgage company does not “own” the house at the time the borrower passes. The loan becomes due and payable and it is up to the borrower’s heirs to determine how they want to accomplish this. They can choose to sell the home and repay the loan, refinance the loan in their own name(s) or they can pay the loan off with other funds available to them. The lender does not own the property at this time and they do not own any personal property inside, it still belongs to the heirs of the borrower.

Also, since the loan is a non-recourse loan, the lender can never seek repayment from any other assets to repay the loan. In other words, if the borrowers received all the funds before the prices of homes fell so dramatically in most areas of the country and lived there for many years without having to make payments, all the while accruing interest and now upon passing the property is not worth as much as is owed on the reverse mortgage, the heirs have the option to choose to either repay the obligation at 95% of the current appraised value or simply allow the lender to take the property to repay the obligation. Regardless of which option they choose, they still have the right to all the borrower’s personal belongings and, as stated, the lender cannot seek repayment from any other assets other than the property itself.

That’s one of the great things about a reverse mortgage, there are a number of ways you can choose to take the money. If your benefit amount is $175,000 and you have no liens on the property, then the next choice you need to make is whether you want the fixed rate or the adjustable rate option. This is one thing that would determine how you would receive the funds.

The fixed rate loan is a “closed-ended” instrument which means that you can only take one draw and that occurs at funding. So if you absolutely want the fixed rate loan, then you would have to take all the money as just a one-time payment. However, the adjustable rate loan has several options available for you to receive your funds. You can choose the same lump sum payment, you can choose to receive monthly payments, you can leave the money in a line of credit that you can access whenever you want or you could choose to take a combination of all the above (i.e. take $50,000 at close to pay off some debts and make home repairs, put $50,000 aside in a line of credit to be used whenever you want and then have the lender use the remaining $75,000 as monthly payments for life).

The choice is yours and the funds can be taken based on your needs and desires and which program you choose. But you do have to remember that your choice will be limited to the lump-sum distribution if you decide you want just the fixed rate option.