With a reverse mortgage loan, can my heirs keep or sell my home after I die? | Consumer Financial Protection Bureau (2024)

FAQs

How heirs should handle a reverse mortgage after death? ›

Usually, the borrower's heirs pay off the loan by selling the house securing the reverse mortgage. The proceeds from the sale are used to pay off the mortgage. If there's any money remaining after the loan is paid off, the heirs get to keep it.

A reverse mortgage loan becomes due and payable after your death and after the death of any coborrowers or of an eligible nonborrowing spouse. Once your heirs receive a due and payable notice from the lender, they have 30 days to buy, sell, or turn the home over to the lender to satisfy the debt.

Selling a house with a reverse mortgage is possible as long as the title is in your name. In fact, that's often what happens after the homeowner has passed on. As long as the loan is repaid, there's no penalty for selling beforehand. Your lender can neither force you nor keep you from selling your home.

No. When you take out a reverse mortgage loan, the title to your home remains with you. This webpage has information about HECMs, which are the most common type of reverse mortgage. Most reverse mortgages are Home Equity Conversion Mortgages (HECMs).

Yes, inheriting a house with a reverse mortgage is possible. If a loved one decides to take out a reverse mortgage on the home, and then chooses you as the heir to that home, then you would inherit the home with the reverse mortgage on it.

If you inherit a property, you become the owner. However, the mortgage obligation remains with the original borrower unless you formally assume the loan. If you merely make payments without assuming the mortgage, you're helping satisfy the debt, but the legal obligation to pay remains with the deceased's estate.

Because of the reverse mortgage's non-recourse feature, the homeowners or their heirs will never owe more than 95% of the home's appraised value, even if the balance of the loan exceeds this amount. This means that if the home appraises for less than the loan balance, 95% of that amount is all that needs to be repaid.

The problem, say advocates, is that many senior homeowners don't understand the fine print in a reverse mortgage. Some wrongly assume the lender will pay the taxes and insurance. But fall behind on those payments or fail to maintain the home, and the lender can foreclose.

If the end of your term is up before you pass away, then you have outlived your reverse mortgage proceeds. With a term payment plan, you reach your loan's principal limit—the maximum that you can borrow—at the end of the term. After that, you won't be able to receive additional proceeds from your reverse mortgage.

Any mortgage, including a reverse mortgage, will impose a title lien. Liens on the property can only be released if the homeowner pays the debt. In those cases, the holder will provide a release of lien which indicates a clear title.

Can you transfer ownership of a house with a reverse mortgage? ›

Trust, probate, transfer on asset deed, joint tenancy and any other transfer option all work with a reverse mortgage… but that reverse mortgage does need to be dealt with right away after death!

These loans are complex, expensive, and drain equity from the property, leaving seniors with very few options later in life. One out of every ten reverse mortgage is in default and could face foreclosure.

Spouse or Co-Borrower

Heirs can inherit a home with a reverse mortgage but will be responsible for settling the debt, either by paying it off, selling the home, or turning it over to the bank.

If the borrower's heirs want to keep the home, they can simply take out a new mortgage on the house to pay off the balance of the reverse mortgage. This is much like refinancing the loan as the original borrower. The heirs can then use the home however they wish, so long as their mortgage allows for it.

A big downside to reverse mortgages is the loss of home equity. Because you're not paying down your reverse mortgage balance, you'll make less profit when you sell, or limit your borrowing power if you need a new loan. You'll pay high upfront fees.

The lender will typically provide the heirs with repayment options, after which they'll have 30 days to make a decision. Depending on where you live, you may have longer to actually pay off the loan.

Your Rights When Inheriting a Reverse Mortgage

Typically, when a homeowner passes away, the lender will send a letter to the homeowner's heirs notifying them that the loan is due. Under the law, heirs have 30 days from receiving the due notice to decide what they want to do to satisfy the debt.

The right to potentially assume (take over) the mortgage.

All successors in California have a right to apply for an assumption of the loan, as long as the loan is assumable. The servicer may evaluate your creditworthiness, including your credit scores, when considering you for an assumption.

Under a reverse mortgage plan, the title to your home belongs to you.