A specialty estate debt payoff loan lets heirs and trustees clear encumbrances quickly so the property can be retained, sold, or distributed without the debt threatening the outcome. We can pay off multiple liens in a single loan at a single closing, and we fund in 10 to 14 business days in most cases.
This page is for informational purposes only
It does not constitute legal or financial advice. Please consult a qualified California attorney before making any decisions about inherited property debt.
Common Debts We Pay Off
Conventional mortgages
Many inherited properties still carry an outstanding mortgage. During probate or trust administration, mortgage payments continue while the estate may have no liquid cash to cover them. We fund loans to clear the mortgage and give the estate time to sell or distribute without payment pressure.
Reverse mortgages (HECMs)
When the last borrower on a HECM dies, the loan becomes due and payable. Heirs typically have six months to repay it or sell the property before the servicer can initiate foreclosure. This is the situation that catches heirs most off guard, and the one where timing matters most.
Property tax liens
California counties place liens on real property for unpaid taxes, and those liens accrue penalties at 1.5% per month after the delinquency date. If a parent was behind on property taxes at death, those penalties continue accruing during estate administration. We can stop the accrual and clear the lien at closing.
Federal tax liens
The IRS can place liens on real property for unpaid income or estate taxes. These do not simply disappear when the property passes to heirs. A payoff loan clears the encumbrance and allows the property to be sold or transferred cleanly.
Mechanic's liens
Contractors who were not paid can record liens against real property. These must be resolved before clear title can transfer. We can include payoff of mechanic's liens in the closing alongside other encumbrances.
Judgment liens
Creditors who obtained judgments against the decedent can record liens against real property. Like other encumbrances, these need to be cleared before a clean title transfer can occur. We can fund the payoff as part of a single closing.
The Reverse Mortgage Deadline Problem
If you inherited a home with a reverse mortgage, read this first
When the last borrower on a HECM dies, the clock starts immediately. Most heirs have six months from the date of death to repay the reverse mortgage or sell the property. After the deadline, the servicer can initiate foreclosure. Contact a lender as early as possible, not in the final weeks.
A Home Equity Conversion Mortgage (HECM) does not require monthly payments while the borrower lives in the home. But when the borrower dies, the loan becomes due and payable, and the heirs typically have six months from the date of death to either repay the reverse mortgage (to keep the home) or sell the property and repay the mortgage from the proceeds.
The servicer can grant one 90-day extension if heirs can demonstrate they are actively working to resolve the situation, bringing the maximum window to nine months. But that extension is not guaranteed, and servicers are not uniformly flexible about it.
The amount owed on a reverse mortgage is the accumulated loan balance, meaning all the draws the homeowner took plus the interest and fees that have compounded over time, or 95% of the appraised value, whichever is less. On a property that has appreciated significantly since the reverse mortgage was taken out, the 95% cap protects heirs from owing more than the home is worth.
We have funded dozens of reverse mortgage payoff loans for California heirs. In most cases, we can fund within 10 to 14 business days, which is fast enough to meet even a tight deadline if heirs contact us promptly.
How the Loan Pays Off Encumbrances at Closing
Our loans are structured as first-lien payoff loans secured by the trust or estate's interest in the California real property. We determine the total payoff amount for each lien at closing. We fund the loan. The escrow or title officer simultaneously directs the funds to pay off each encumbrance and records the lien releases. The estate or trust emerges from the transaction with clear or significantly improved title.
The estate then has time to sell or distribute the property without debt pressure. When the property sells or the beneficiary refinances into a conventional loan, our loan is repaid from the proceeds.
We can pay off multiple encumbrances in a single loan at a single closing. There is no need to sequence separate payoffs if the property has both a mortgage and a tax lien, for example. One closing, one transaction, everything cleared at once.
Rate Range and Fees
| Item | Range |
|---|---|
| Interest rate (per year) | 9.5% – 10.95% |
| Origination points | 1.25 – 1.95 points |
| Appraisal (in-house BPO) | No charge |
| Lender document fee | No charge |
| Prepayment penalty | None |
| Title and escrow | Standard California rates |
On a $400,000 payoff loan at 10% over six months with 1.5 points origination, total interest is approximately $20,000 and origination is $6,000. Total financing cost: roughly $26,000. Compare that to the accruing penalties on a tax lien, the foreclosure risk on a reverse mortgage, or the cost of losing an inherited property. The loan cost is almost always the better outcome.
No surprise fees
We do not charge lender document fees or appraisal fees. We conduct our own in-house BPO valuation at no cost to you. The table above is the complete picture.
Timeline
For reverse mortgage payoffs where the clock is tight, contact us as early as possible. The earlier you engage a lender, the more options you have. Waiting until the final 30 days creates real risk for everyone.
A Reverse Mortgage Case Study
The Chen family, Sacramento
The Chen family inherited their mother's Sacramento home in early spring. The home was worth approximately $780,000. Their mother had taken out a reverse mortgage years earlier, and the accumulated balance was $390,000.
The three adult children had six months from the date of death to resolve the situation. Two wanted to sell. One wanted to keep the home and move in. The one who wanted to keep it needed to pay off the $390,000 reverse mortgage and buy out his two siblings' shares.
Combined, he needed approximately $650,000. We funded the payoff loan in 11 business days. The reverse mortgage was paid off and released. He moved into the property, filed the BOE-19-P for the Prop 19 exclusion, and bought out his siblings from the loan proceeds. He later refinanced into a conventional mortgage once he held clear title.
The reverse mortgage deadline that had been 18 weeks away when he called us was met with seven weeks to spare.
Frequently Asked Questions
What if the reverse mortgage loan balance exceeds 95% of the home's value?
Under HECM rules, heirs are never required to pay more than 95% of the appraised value to retire a reverse mortgage, even if the accumulated loan balance is higher. We work with that cap when structuring the payoff loan.
Can we fund a loan to pay off a mortgage while the estate is still in probate?
Yes. Probate estate properties qualify. The personal representative authorizes the transaction under their authority to manage estate assets, and the loan is secured by the estate's interest in the real property.
What if there are multiple liens and we are not sure of all the amounts?
We work with title companies to identify and quantify all recorded liens before closing. You do not need to come to us with every payoff amount already in hand. We can help sort that out as part of the process.
Does the property need to be in good condition?
We underwrite primarily based on the value of the real estate. Properties with deferred maintenance can still qualify, though the loan-to-value we offer may be more conservative on properties in poor condition.
Can this type of loan help if the estate is close to losing the property to foreclosure?
Yes, and time is the critical variable. If a foreclosure has been noticed, contact us immediately. We have funded loans to stop foreclosure proceedings, but we need enough lead time to complete underwriting and close before the trustee's sale date.
Can you pay off more than one type of lien in a single closing?
Yes. We regularly pay off a conventional mortgage and a tax lien in the same closing, or a reverse mortgage alongside mechanic's liens. One transaction clears everything. There is no need to sequence multiple separate closings.
Act Before the Deadline Closes In
If you are dealing with a reverse mortgage clock, a tax lien penalty situation, or any other encumbrance on inherited California real estate, the sooner you engage a lender the better. Call us today.
Call 760-722-2991