What Heirs Need to Know About Inheriting a Home with a Reverse Mortgage
When a loved one with a reverse mortgage passes away, it can raise a lot of questions for the heirs. Can you keep the house? Do you owe money? What happens if the home is worth less than the loan balance?
This guide will walk you through everything heirs need to know when they inherit a home with a reverse mortgage, including your options, important deadlines, and how to protect the estate’s assets.
What Is a Reverse Mortgage?
A reverse mortgage—most commonly a Home Equity Conversion Mortgage (HECM)—is a loan available to homeowners age 62 and older. It allows them to convert part of their home equity into tax-free cash with no monthly mortgage payments. The loan is repaid when the borrower dies, sells the home, or permanently moves out of the home.
The key takeaway: The loan becomes due when the last borrower dies or no longer uses the home as their primary residence.
Step 1: Notify the Lender of the Borrower’s Death
When the borrower dies, the reverse mortgage servicer must be notified. Usually, the lender will request:
A copy of the death certificate
Contact information for the estate executor or heirs
Legal documentation proving authority (will, trust, or probate letters)
You don’t have to make decisions immediately, but the timeline for repayment starts once the lender is notified.
Step 2: Understand the Timeline You’re Working With
After the borrower’s death, the reverse mortgage becomes “due and payable.” The lender will send a notice, and HUD guidelines allow the heirs or estate:
30 days to respond to the lender’s notice
Up to 6 months to settle the loan (repay, refinance, or sell the home)
Up to two 90-day extensions (if you show progress toward resolving the loan)
Tip: Stay in communication with the loan servicer. You can request extensions if you’re actively trying to sell or refinance, but ignoring deadlines may lead to foreclosure.
Step 3: Know Your Options as an Heir
You generally have three options when inheriting a home with a reverse mortgage:
1. Keep the Home
You can keep the home by repaying the loan. If the home is worth less than the loan balance, you are only required to pay 95% of the home’s appraised value—thanks to FHA insurance protecting non-recourse HECM loans.
You can pay with personal funds or refinance into a new traditional mortgage in your name.
2. Sell the Home
If you don’t want to keep the property, you can sell it:
List the home and work with a real estate agent familiar with reverse mortgages
Use the sale proceeds to repay the reverse mortgage
If the sale price is less than the loan balance, HUD will cover the difference (you won’t be personally liable)
3. Walk Away (Deed-in-Lieu of Foreclosure)
If you don't want to keep or sell the home, you can complete a deed-in-lieu of foreclosure:
This involves voluntarily transferring the property to the lender
It avoids foreclosure proceedings
The lender forgives the remaining debt, and you walk away with no further obligations
What Happens to the Remaining Debt?
Reverse mortgages are non-recourse loans. That means if the loan balance is higher than the home's value, the heirs or estate are not responsible for the shortfall. The FHA mortgage insurance fund pays the difference.
This protects the heirs and ensures the estate doesn’t owe more than the home is worth.
Key Documents You’ll Likely Need
To begin the process, gather the following documents:
Death certificate of the borrower
Mortgage and loan information
Letters of administration or proof of executor status
Appraisal or market analysis (if selling the home)
Any communication from the loan servicer
Common Mistakes to Avoid
Ignoring communication from the lender
Waiting too long to make a decision
Not requesting an extension if needed
Selling the home without understanding HUD short sale rules
Failing to get legal advice if the estate is in probate
Final Thoughts
Inheriting a home with a reverse mortgage doesn’t have to be overwhelming, but it does require timely action and a clear understanding of your rights. Remember:
You can sell, repay, or surrender the home
You’re never personally liable for more than the home’s value
Communication with the lender is essential
If you’re unsure of what to do, consult with a reverse mortgage specialist, estate attorney, or HUD-approved housing counselor to make the best decision for your family and financial future.
Frequently Asked Questions (FAQs)
Q: Can I be forced to sell the home to pay off a reverse mortgage?
A: No, you are not forced to sell the home. However, the loan must be repaid—whether by selling the home, refinancing it, or turning it over to the lender. If you want to keep the property, you'll need to repay the balance or 95% of the home's current appraised value, whichever is less.
Q: What if the reverse mortgage balance is more than the home is worth?
A: You’re not responsible for paying the difference. HECM reverse mortgages are federally insured and non-recourse, which means the lender cannot pursue the estate or heirs for any shortfall.
Q: What if the estate is in probate?
A: If the home is part of a probate estate, the probate process will need to be initiated before any decisions about the home can be finalized. However, it’s still important to notify the lender and maintain communication during this period.
Q: Can siblings or multiple heirs keep the home together?
A: Yes, but the reverse mortgage must still be repaid. If multiple heirs wish to retain ownership, they can jointly refinance the mortgage or one heir can buy out the others.
Checklist: First Steps When Inheriting a Reverse Mortgage Property
Notify the reverse mortgage servicer of the borrower’s death
Gather all loan and homeownership documents
Request a current payoff statement from the lender
Decide if you want to keep, sell, or surrender the property
Order an appraisal or market analysis (if needed)
Communicate with the estate’s attorney or executor
Request extensions from the lender if needed
Work with a real estate agent or loan officer if selling/refinancing
Call to Action
Need help navigating your options?
If you're an heir or executor dealing with a reverse mortgage property, don’t navigate it alone. Speak with a certified reverse mortgage counselor, a probate attorney, or a knowledgeable real estate professional to explore your best course of action.