With a reverse mortgage loan, can my heirs keep or sell my home after I die?
It depends. If there are no co-borrowers or an eligible non-borrowing spouse, your heirs will need to pay the full loan balance to keep the home. To sell it, they would need to repay the full loan balance or at least 95 percent of its appraised value if the loan balance owed is more than the home value.
When you – and any co-borrower(s) or an eligible non-borrowing spouse as applicable – have passed away, your reverse mortgage loan becomes due and payable. Your heirs have 30 days from receiving the due and payable notice from the lender to buy, sell, or turn the home over to the lender to satisfy the debt. This is the case for Home Equity Conversion Mortgages (HECMs), which are the most common type of reverse mortgage loan.
However, it may be possible for the timeline to be extended up to six months so your heirs can sell the home or obtain financing to purchase the home. Your heirs can consult a HUD-approved housing counseling agency or an attorney for more information.
If your heirs need to sell the home
Some heirs may lack funds to pay off the loan balance and may need to sell the home to repay the reverse mortgage loan.
If the loan balance is less than the home value, your heirs can use the sale proceeds to repay the loan and keep the difference. If the balance owed on the loan is more than what the home is worth, your heirs can sell the home for at least 95 percent of the current appraised value in order to pay off the loan. The remaining balance of the loan is covered by the mortgage insurance that the reverse mortgage borrower paid during the duration of the loan.
If your heirs want to keep the home
If your heirs would like to keep your home instead of selling it, they must pay it off with another source of funds. The loan balance will need to be paid in full.
How to prepare
If you have a reverse mortgage loan and want to leave your home to your children, it’s important to talk to them now about their repayment options. You may also want to consider talking to a professional about creating an estate plan.