Quick Answer
When the last borrower passes away, the reverse mortgage becomes due and the heirs choose how to settle it: keep the home by repaying the balance (typically through a refinance), sell the home and keep any remaining equity, or sign it over to the lender with no further obligation. Heirs generally have 6 months — extendable up to 12 — to act, and the FHA non-recourse guarantee means they never owe more than the home's value.
The Loan Becomes Due
When the last borrower passes away, the reverse mortgage loan becomes due and payable. The estate or heirs are notified by the loan servicer, typically within 30 days of the servicer being informed of the borrower's death. From that point, heirs usually have 6 months, with up to two 90-day extensions available with HUD approval, to resolve the loan.
Option 1: Sell the Home
The most common choice. The estate sells the home at market value. The reverse mortgage balance (principal plus accrued interest) is repaid from the sale proceeds. Any remaining equity goes to the heirs. If the home sells for more than the loan balance, heirs keep the difference entirely.
Option 2: Refinance or Repay the Loan
If heirs want to keep the home, they can refinance the reverse mortgage into a traditional mortgage (or other loan product), or simply pay off the balance with personal funds. They must repay the lesser of the loan balance or 95% of the current appraised value.
Option 3: Walk Away (Deed in Lieu)
If the loan balance equals or exceeds the home's value, heirs can walk away with no financial obligation. The FHA non-recourse guarantee protects the estate — heirs will never owe more than the home is worth at the time of sale. The FHA insurance fund covers any shortfall.
The Estate and Probate
A reverse mortgage on a property going through probate can complicate timing. We recommend working with an estate attorney to ensure the loan servicer is notified promptly and the repayment timeline aligns with probate proceedings. Extensions are usually available if requested in good faith.
Planning Ahead for Your Heirs
The best gift you can give your heirs is preparation. Inform them about the reverse mortgage, leave clear instructions, and ensure they have the loan servicer's contact information. We can provide a summary letter for your estate documents.
