What happens to my reverse mortgage when I die?
Reverse mortgage loans typically must be repaid when you die.
When you, the reverse mortgage borrower, die, the loan has to be paid back. However, what happens to the reverse mortgage after your death will depend on a number of factors, including whether:
- You have a co-borrower on the reverse mortgage loan,
- The loan was taken out before or after August 4, 2014, and
- You were married at the time you took out the loan and continued to be married up until your death
If there’s a co-borrower on the loan
When your spouse or partner is a co-borrower, you are both responsible for the loan and both receive the benefits from the reverse mortgage. This means that if your spouse or partner is a co-borrower, they will be able to remain in the home after you die.
It’s a good idea to check with your reverse mortgage servicer to make sure its loan records are accurate and that you and your co-borrower are both on the loan. Call your servicer to find out what names are listed on your loan. See your reverse mortgage loan statement for the phone number, and ask them to send you this information in writing for your records. You can also write a letter requesting this information.
If you have a non-borrowing spouse, the rules depend on when the loan was taken out
If your spouse is not a co-borrower, they’re called a “non-borrowing spouse.” This means that after you die, your spouse will not be able to receive the benefits of the reverse mortgage loan and may have to move out if your spouse does not meet certain requirements.
For reverse mortgage loans with case numbers assigned on or after August 4, 2014
You may contact your servicer to find out when your reverse mortgage loan’s case number was assigned, but generally it happens right before you signed the loan documents. If your reverse mortgage case number was assigned after August 4, 2014, and is only in your name, contact your loan servicer to find out if your non-borrowing spouse will qualify to stay in the home after you die (called a “deferral period”). To qualify for a deferral period your spouse will need to be able to show that:
- Within 90 days of your death, your spouse has legal title to the property or a legal right (such as through a lease, heirship affidavit, partial ownership, or court order) to remain in the home for life.
- You were married to each other at the time of the reverse mortgage closing (meaning when you signed the loan documents) up until your death. Couples in a committed relationship who at the time the reverse mortgage loan was taken out were unable to be legally married based on gender must show that they were legally married by the time of the borrower’s death.
- At the reverse mortgage closing your husband or wife was disclosed to be your spouse and was specifically named as an Eligible Non-Borrowing Spouse in the loan documents.
- Your spouse currently lives and has lived in the home as their principal residence since the beginning of the reverse mortgage loan.
- Your spouse continues to fulfill all other obligations of the reverse mortgage including paying the homeowners insurance and property taxes and keeping the home in good repair.
For reverse mortgage loans with case numbers assigned before August 4, 2014
If you are the only borrower and you die and are survived by a non-borrowing spouse who lives in the home, your lender or servicer has two options: (1) to foreclose on your home; or (2) allow your non-borrowing spouse to stay in the property through a process called Mortgagee Optional Election (or MOE) Assignment. It’s your lender who makes this decision.
If your lender decides to foreclose on your home or finds that your non-borrowing spouse does not qualify for MOE Assignment, they must begin foreclosure proceedings within six months of your (the borrower’s) death.
Mortgagee Optional Election (MOE) Assignment
If your lender or servicer chooses the MOE Assignment, they must, within 120 days of your death, tell the U.S. Department of Housing and Urban Development (HUD). Your lender or servicer then must, within 60 days of its MOE Assignment election, evaluate whether your non-borrowing spouse meets all eligibility requirements for MOE Assignment. There are a number of significant eligibility requirements that your non-borrowing spouse must meet:
- Provide within 90 days of your death, title to the property or a legal right (such as through a lease, heirship affidavit, partial ownership, or court order) to remain in the home for life.
- Show that you were married to each other at the time of the reverse mortgage closing (meaning when you signed the loan documents) up until your death. Couples in a committed relationship who at the time the reverse mortgage loan was taken out were unable to be legally married based on gender, must show that they were legally married by the time of the borrower’s death.
- Show that they currently live and have lived in the home as their principal residence since the beginning of the reverse mortgage loan. Note, your property is still considered your “principal residence” if you or any borrower has temporarily lived in a health care institution not more than twelve consecutive months.
- Cure any default by paying all outstanding property taxes or homeowners insurance.
While both you and your spouse are living, gather the documents needed to prove your husband or wife is an Eligible Non-Borrowing Spouse. If you or your spouse are not on the loan but believe that you should be, promptly seek legal advice. You can also try to add your spouse to the loan as a co-borrower by refinancing into a new reverse mortgage. You’ll have to have enough equity to qualify for a refinance and you’ll need to pay the loan fees again for the new loan.
What your heirs need to know about your reverse mortgage loan
If your heirs want to keep your home after you and your spouse die, they will have to repay either the full loan balance or 95% of the home’s appraised value–whichever is less.
Talk to your children and heirs now and make a plan for any non-borrowing family members living in the home. Make sure your adult children or any family members living in the home know what to expect when your reverse mortgage loan comes due. If they wish to keep the home, contact your reverse mortgage company for written information that explains their options. Discuss this information with your family and follow up with the reverse mortgage company for anything that you don’t understand.
Note: This information only applies to Home Equity Conversion Mortgages (HECMs), which are the most common type of reverse mortgage loan.