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Purchasing rental property on a reverse mortgage with gift of equity?

My husband's mother recently passed and she has 25% ownership of a rental property along with her 3 siblings.  The rental property loan was in her name only and it is currently a reverse mortgage.  There is currently about 15% equity in the property.  The 25% ownership passed to my husband and the siblings are willing to sell the property to us and gift us the equity in it.  Can we purchase the property and use the gift of equity as a down payment if it is currently in a reverse mortgage?
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January 21 2012 - Los Angeles
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Answers (3)

You don't need to purchase the property, you already own it (or will assuming it has to pass through probate). You won't be able to keep the reverse mortgage, you will have to refinance the mortgage because the reverse mortgage is going to have a clause in it that requires that it be sold within a time period after your mother in law's death, typically a year. If the siblings simply want to just sign quitclaim deeds that will transfer the entire property plus the equity to you, then you will simply need to refinance it based upon your own creditworthiness and assets. If there's equity there then you may not even have to put any cash into it...
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January 27 2012
Another option to consider would be a refinance.  Depending on whether your mother in law willed you and you husband her interest or named you in a trust; you being on title, you can then refinance the property and there  would be no need for a down payment.

Good luck
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January 22 2012
There is no reason that you could not do that. However, it will be at the discretion of the lender who will be doing the new loan on the property. I would contact a Mortgage Broker rather than a bank as most banks aren't creative enough to understand what you are trying to do. The biggest question will be the Reverse Mortgage requirement as typically that mortgage becomes due and payable at your mothers death. There is usually a time period in which you have to pay off the Reverse Mortgage.
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January 21 2012
 
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