What happens to my reverse mortgage when I die?
Reverse mortgage loans typically must be repaid when you die.
What happens to the reverse mortgage will depend on several factors, including:
- Whether you have a co-borrower on the reverse mortgage loan,
- When you took out the reverse mortgage, and
- Whether you were married when the loan documents were signed and continued to be married up until your death.
If there’s a co-borrower on the loan
When there is a co-borrower on the loan, both you and the co-borrower receive the benefits of the loan and are responsible for meeting the obligations of the loan. If one borrower dies, the co-borrower will be able to remain in the home and receive loan payments as long as they meet the obligations of the reverse mortgage loan.
It’s a good idea to check with your reverse mortgage servicer to make sure your 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 servicer’s phone number or address and ask them to send you this information in writing for your records.
If your spouse is not a co-borrower
Your non-borrowing spouse may stay in the home if they pay off the loan. They may also be able to stay in the home without paying off the loan, depending on when the loan was originated (meaning when it was taken out) and whether they qualify as an Eligible Non-Borrowing Spouse under HUD’s rules. An Eligible Non-Borrowing Spouse will not get any money from the reverse mortgage. The process of qualifying to be an Eligible Non-Borrowing Spouse may be difficult. Your non-borrowing spouse may want to get help from an attorney or a HUD-approved housing counseling agency.
For reverse mortgage loans with case numbers assigned on or after August 4, 2014
Your lender or servicer will determine if your non-borrowing spouse qualifies to stay in the home after you, the borrower, die or move into a healthcare facility for more than 12 consecutive months (called a “deferral period”). To qualify as an Eligible Non-Borrowing Spouse, your spouse must:
- Have been married to you at the time the loan documents were signed, and stay married to you up until your death. If you and your spouse were a same-sex couple and were unable to
- be legally married at the time the reverse mortgage loan was made, your spouse must show that you were legally married to each other at the time of your death.
- Have been identified in the loan documents as a non-borrowing spouse.
- Have lived, and continue to live, in the home as their principal residence after you die or move into a healthcare facility for more than 12 consecutive months.
- Continue to meet the loan requirements and make sure the loan does not become due and payable for any other reason.
For reverse mortgage loans with case numbers assigned before August 4, 2014
As explained in more detail below, after you, the borrower, die or move into a healthcare facility for more than more than 12 consecutive months, your lender or servicer can choose to either:
- Foreclose on the home, or
- Enter a process called “Mortgage Optional Election (MOE) Assignment” that allows an Eligible Non-Borrowing Spouse to stay in the home.
If your lender or servicer 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 death. If your non-borrowing spouse is actively trying to sell the property or satisfy the debt in some other way, they may request a delay of the foreclosure for up to 180 days.
Mortgagee Optional Election (MOE) Assignment
If your lender or servicer decides not to foreclose and instead enters the MOE Assignment process, to qualify as an Eligible Non-Borrowing Spouse, your spouse must:
- Have been married to you at the time the loan documents were signed and remain married to you in situations in which you move into a healthcare facility for more than 12 consecutive months, or remain married up until your death. If you and your spouse were unable to be legally married at the time the reverse mortgage loan was made, your spouse must show that you were legally married to each other at the time of your death.
- Have lived in the home since the beginning of the loan and continue to live in the home as their principal residence ever after you die or move into a healthcare facility for more than 12 consecutive months.
- Provide their Social Security number or Tax Identification Number.
- Agree that they will no longer receive any payments from the reverse mortgage loan.
- Continue to meet all loan obligations, including paying property taxes and homeowner’s insurance.
If you have heirs
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 percent of the home’s appraised value – whichever is less.
Prepare any non-borrowing family members living in the home by deciding together what they will do after you die.