A reverse mortgage lets an older homeowner borrow against the house without monthly payments, but the loan does not go away. It has to be repaid when the house is sold, when the last borrower dies or moves out, or in a few other situations. Whether you are the borrower ready to downsize or an adult child who just received a letter from the servicer, the rules below apply to the most common type, the FHA-insured Home Equity Conversion Mortgage, or HECM.
When a reverse mortgage comes due
According to the CFPB, a HECM generally becomes due when the last surviving borrower or eligible non-borrowing spouse dies, sells the home, or stops living there as a main residence. It can also come due if property taxes or homeowners insurance go unpaid, if the house is not kept in reasonable repair, or if the borrower is in a health care facility for more than 12 months in a row with no co-borrower at home. The FTC notes that interest is added to the balance every month, so the payoff today is likely higher than the amount originally borrowed.
Selling while you are still living
You can sell a home with a reverse mortgage the same way you would sell any house with a loan on it. Request a payoff statement from your servicer, and the title company or closing attorney pays the balance from the sale proceeds at closing. Whatever is left after the payoff and closing costs is yours. Selling can make sense when the house has become too much to maintain, when you are moving closer to family or into care, or when keeping up with taxes and insurance is getting hard. A HUD-approved housing counselor can help you weigh the decision.
When the borrower dies: the heirs' clock
If no co-borrower or eligible non-borrowing spouse remains, the loan becomes due and payable after the last borrower's death. The servicer sends a letter, and the CFPB says heirs generally have 30 days to decide whether to pay off the loan, sell the house, or turn it over to the lender. That time can be extended up to six months so the family can sell or arrange financing. HUD can also approve up to two additional 90-day extensions when heirs show the house is actively being marketed or financing is in progress. Probate alone is not a reason for an extension, so call the servicer early and keep them updated.
The 95% rule if the house is underwater
HECMs are non-recourse loans, which means neither the borrower nor the estate can owe more than the house is worth. If the balance is higher than the home's value, the CFPB says heirs can satisfy the loan by selling for at least 95% of the appraised value, and FHA mortgage insurance covers the rest. If the house is worth more than the balance, the heirs sell, pay off the loan and keep the difference. Either way, the heirs do not personally owe the shortfall. Have an attorney or housing counselor confirm how this applies to your loan.
Keep up the house while it sells
Until the loan is paid off or the house is sold, the estate generally has to keep property taxes, homeowners insurance and any HOA dues current. A vacant house can also cause insurance trouble, and repairs that were put off for years tend to show up during a retail buyer's inspection. If heirs live far away, managing a cleanout, contractors and showings within a few months can be hard. Plan the timeline backward from the servicer's deadline and the date of any foreclosure referral.
Selling a reverse mortgage house to us
We buy houses as-is in all 50 states, including homes with reverse mortgages, and we can usually close in days or weeks. That speed can help when a servicer deadline is close. Our written offer lists every cost, there are no commissions or seller fees from us, and the title company or attorney pays off the servicer at closing. A cash offer will usually be below what the house might bring after repairs and a full listing, because we take on the repairs and resale risk. If the house is underwater, the price still has to meet the servicer's 95% requirement, and we will work within that.