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Reverse mortgage guide
When the last borrower dies, a HECM reverse mortgage becomes due, unless an eligible non-borrowing spouse still lives in the home. Your heirs then choose what to do: keep the home by paying off the loan, sell it and keep any equity left, or sign it over to the lender. Because a HECM is non-recourse, they don't have to pay more than the home is worth, and if the home is worth less than the balance, they can generally settle the loan for 95 percent of its appraised value. Heirs have 30 days to respond to the servicer's notice, and usually six months to finish, with possible extensions if they're actively working on a sale or payoff. A little planning now makes all of this much easier on your family.
We all know there are only two sure things in life: death and taxes. Seeing as none of us are going to get out of here alive, it makes sense to talk about what happens to your home, and your reverse mortgage, when you're gone.
This is a question that comes up with nearly every client I work with. Usually it's the adult kids asking, sometimes a little nervously. The good news is that the HECM has clear rules here, and most of them protect your family. This guide walks through what happens, step by step, and how to make it easy on the people you leave behind.
These rules are for the HECM, the FHA-insured reverse mortgage most people get. Proprietary (jumbo) reverse mortgages follow their own loan documents, so I always check those in writing.
A HECM becomes due and payable when the last surviving borrower:
It can also come due if the loan terms aren't met, like unpaid property taxes or insurance. But this guide is about the most common case: the last borrower passing away.
If you're married and your spouse wasn't on the loan, the loan may not come due yet. An eligible non-borrowing spouse can generally keep living in the home under what HUD calls a deferral period. The loan comes due later, when that spouse dies or moves out. Then everything on this page applies. See the Non-Borrowing Spouse guide.
Usually the family calls. Sometimes the servicer finds out first, for example because the annual occupancy check goes unanswered.
My advice to heirs is simple: call the servicer yourself, and do it early. You'll find the servicer's name and phone number on the monthly statement. Calling early starts the clock on your terms, and it starts the relationship with the people who can give you more time.
Once the servicer confirms the death, it notifies HUD, and then sends a letter to the borrower's estate and known heirs. That letter says the loan is due and payable and lists the ways to settle it.
From the date of that notice, the family has 30 days to tell the servicer what they plan to do. That doesn't mean they have to finish in 30 days. It means they have to respond.
Don't ignore that letter. I've seen families sit on it out of grief or confusion, and silence is the one thing that really hurts their options.
Under HUD's rules, the people with the right to the property can choose one of these:
Your heirs pay off the loan, usually with a new mortgage of their own or with other funds, and the home is theirs.
If the home is worth less than the loan balance, the rules for an heir buying the home are worth checking carefully. Heirs can generally keep the home by paying the lesser of the balance or 95 percent of the appraised value. I'll confirm the current rule with the servicer for your family's situation before anyone makes plans.
If the home is worth more than the loan balance, your heirs sell it, the loan is paid off from the sale, and whatever's left goes to the estate. This is the most common outcome I see.
If the balance has grown larger than the home's value, the home can generally be sold for at least the lesser of the loan balance or 95 percent of its appraised value. The loan is considered paid. FHA insurance covers the rest. Your heirs don't pay the difference.
HUD also caps the closing costs that can come out of that kind of sale.
If there's no equity and nobody wants the home, your heirs can sign a deed in lieu of foreclosure. The lender takes the home, the loan is satisfied, and your heirs walk away owing nothing.
HUD's rules generally require the deed in lieu to be recorded within nine months of the due date. If it's done within six months, the servicer may offer a relocation incentive, often called "cash for keys".
Technically an option. Practically, it ends in foreclosure. The non-recourse protection still applies, so your heirs won't owe the difference, but they lose any chance at equity and the process is harder on everyone. I never recommend it.
This is the part that matters most to families. A HECM is a non-recourse loan. Only the home secures it.
That means:
That protection is a big part of what the FHA mortgage insurance pays for. See Are reverse mortgages non-recourse loans?
Here's the general timeline on a HECM. Every servicer handles it a little differently, so the most important thing is to stay in contact.
Behind the scenes, the servicer generally has to start foreclosure within six months of the due date unless HUD approves more time. That's why extensions depend on showing real effort. A listing agreement, an offer, or a loan approval letter is what gets you more time. A promise to "think about it" usually doesn't.
If you're an heir reading this, here's what I'd do, in order:
It often is, and that's okay. Probate can take months, and servicers deal with it all the time. The key is to tell the servicer early and send them updates.
Whoever has the legal right to sell or transfer the home, usually the executor or trustee, is the person the servicer will work with. If you'd like your kids to be able to talk to the servicer right away, ask your servicer about a third-party authorization form while you're still here. A living trust can help with the home itself, but it doesn't replace that form.
That's a conversation for your heirs' CPA. Questions like the home's tax basis, whether any capital loss or gain applies, and whether interest that was added to the balance becomes deductible when the loan is paid off all depend on the family's situation. I won't guess at tax answers, and you shouldn't let anyone else guess either.
The best thing you can do is talk with your heirs before you take out a reverse mortgage, or right after. Nobody likes this conversation. Have it anyway.
It's worth saying. A reverse mortgage uses up some of the equity your heirs might inherit. But it can also mean your kids don't have to help pay your bills while you're alive, or cover the cost of care at home. For a lot of families, that trade is worth it. For others, keeping the home free and clear matters more. Both are fair choices.
If you're weighing that, see Will my family lose their inheritance? and Reverse Mortgage Pros and Cons.
No. There's no monthly payment for heirs to take over. What they inherit is the home, the loan on it, and the choice of what to do. While they work through it, the estate does need to keep paying property taxes and homeowners insurance and keep the home maintained.
No. On a HECM, they don't have to pay more than the home is worth, and the lender can't go after their own assets.
Yes, by paying off the loan, usually with a new mortgage or their own funds. If the home is worth less than the balance, ask the servicer about the 95 percent rule for heirs.
Generally 30 days to respond, about six months to sell or pay off, and possible extensions in 90-day increments up to about a year, if they're actively working on it.
Your heirs sell or refinance, pay off the loan, and keep the difference.
They can generally sell it for at least the lesser of the balance or 95 percent of its appraised value, or offer a deed in lieu if the servicer accepts it, and owe nothing more.
If they're an eligible non-borrowing spouse, they can generally stay in the home after you die. See the Non-Borrowing Spouse guide.
The estate, while it works through the process. If taxes or insurance go unpaid, the servicer may pay them and add the cost to the balance.
That's a question for the servicer and an attorney. The loan is due, so renting doesn't stop the clock.
They can be. The jumbo programs we offer are non-recourse: you and your heirs won't owe more than the home's value when it's sold, even if the balance is higher. That protection comes from the loan contract, not FHA insurance, so we review each product's documents with you. Timelines for heirs are also set by each program's documents.
If you'd like, I'm glad to talk with your heirs directly, now or later. It's one of my favorite calls to make, because the fear usually goes away once people see how it works. Call us at 530-888-6000, or get your estimate to see your numbers.
Live as if you were to die tomorrow. Learn as if you were to live forever.
ZYNG Mortgage, Inc., NMLS #76801. A reverse mortgage has no required monthly mortgage payments and uses your home's equity. Fees, mortgage insurance and other costs can be added to the loan balance, and the balance grows over time as interest is added, so your equity typically decreases. When the loan becomes due, the home may need to be sold, or the loan repaid from other funds. Interest is not tax-deductible until it is paid, in part or in full. You keep title to your home and must keep paying property taxes, homeowners insurance and upkeep, and meet the other loan terms; not doing so can make the loan due and could lead to foreclosure.
This material is not from HUD or FHA and was not approved by HUD or a government agency.
HECM count at the top of this page: HUD data through September 2026 (source, opens in a new tab).
