When the last borrower passes away, the reverse mortgage becomes due. Your heirs can sell the home and keep what's left, pay off the loan and keep the home, or buy it for the lesser of the loan balance or 95% of its appraised value. They never owe more than the home is worth.
Your heirs' options
- Sell the home and keep any equity left after the loan is paid.
- Keep the home by paying off the loan, for example with savings or a new mortgage.
- Buy it for less: the lesser of the loan balance or 95% of the current appraised value.
- Walk away with a deed-in-lieu of foreclosure, owing nothing more.
How long do heirs have?
The servicer notifies the estate when the loan becomes due. Heirs generally have 30 days to say what they plan to do and up to six months to sell or pay off the loan. HUD can approve up to two 90-day extensions if they're actively selling or refinancing. Interest and insurance keep adding up until the loan is paid, so moving promptly helps.
What about a spouse who isn't on the loan?
If both spouses are 62 or older, both are usually borrowers, which gives the strongest protection. If your spouse is younger than 62, they may qualify as an eligible non-borrowing spouse for loans with FHA case numbers assigned on or after August 4, 2014. To stay in the home after you pass, your spouse must:
- Be married to you at closing and stay married, and be named in the loan documents
- Live in the home as their primary residence
- Establish a legal right to stay in the home within 90 days after your death
- Keep paying taxes, insurance and upkeep
Your spouse can't receive more money from the loan after your death, and the amount you can borrow is based on the younger spouse's age.
Talk about the plan as a family. Many borrowers invite their adult children to the counseling session or to a call with us, so everyone knows what to expect.