By Tyler Plack
Tyler Plack is the President of South River Mortgage. Tyler holds an active FHA Direct Endorsement (DE) underwriting certification and is the author of The Retirement Solution: Maximizing Your BenefitTyler is a seasoned entrepreneur and real estate investor renowned for his expertise in reverse mortgages and his commitment to addressing seniors' equity challenges. Tyler brings a unique perspective to his ventures, having built several successful companies throughout his career. His insights are frequently sought by industry publications, where he is recognized for his vast knowledge in the realm of reverse mortgages.
An avid investor in income-producing properties, Tyler is dedicated to helping seniors navigate their financial needs with compassion and expertise. When Tyler is not helping solve America's retirement crisis, he is a skilled pilot flying airplanes for fun.
It’s a situation many families face, often without warning.
A reverse mortgage was taken out years ago. A parent helped with the paperwork. Time passed. Now grandparents are in their 80s, a family member is living in the home, and everyone is asking the same question:
How do we keep the house?
The good news is this:
A reverse mortgage does not mean the home is automatically lost. But there are rules, timelines, and options that families need to understand early.
First: Who Owns the Home Right Now?
With a reverse mortgage, the homeowner still owns the house.
The lender does not own it. They simply hold a lien—just like any other mortgage.
As long as at least one borrower:
- Is alive
- Lives in the home as their primary residence
- Pays property taxes, insurance, and basic upkeep
…the reverse mortgage stays in place.
What Happens When the Homeowners Pass Away?
When the last borrower passes away (or permanently moves out), the reverse mortgage becomes due and payable.
At that point, the heirs have options. The lender does not immediately take the house.
Typically, heirs are given:
- An initial 6 months to act
- Possible extensions (often up to 12 months total)
During that time, the family can decide what to do next.
Option 1: Buy the House by Paying Off the Reverse Mortgage
This is the most common path for families who want to keep the home.
Important rule:
Heirs only need to pay the lesser of:
- The reverse mortgage balance, or
- 95% of the home’s current appraised value
This FHA protection is critical.
If the home is worth $475,000 and the reverse mortgage balance is $290,000, the family does not need to pay full market value—only the loan balance.
The payoff can be done by:
- A traditional mortgage
- Cash
- Another refinance strategy
Option 2: Refinance Into a New Loan
If a family member (such as a surviving spouse or adult child) wants to keep the home, they can refinance the reverse mortgage into:
- A conventional mortgage (if income and credit qualify)
- An FHA loan
- In some cases, another reverse mortgage (if age 62+ and eligible)
The key requirement is that the new loan must fully pay off the existing reverse mortgage.
Option 3: Sell the Home
If the family chooses not to keep the home:
- The house is sold
- The reverse mortgage is paid off from the sale
- Any remaining equity belongs to the heirs
If the home sells for less than the loan balance, FHA insurance covers the difference. The family is not personally responsible for the shortfall.
Are You Eligible for a Reverse Mortgage?
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What About Transferring the Home Before Death?
This is where many families get confused.
Adding someone to the deed does not remove the reverse mortgage.
The loan stays attached to the property.
In fact, transferring ownership improperly can trigger the loan to come due early.
Before doing anything like:
- Adding a child or spouse to title
- Quitclaim deeds
- Trust transfers
…it’s critical to speak with a reverse mortgage specialist or estate attorney.
Common Misunderstandings We See All the Time
- “The bank owns the house.”
The homeowners do. - “We have to buy it at full market value.”
Heirs can purchase it for the loan balance or 95% of appraised value—whichever is less. - “We have to decide immediately.”
There is a structured timeline, but waiting too long can cause problems. - “Reverse mortgages wipe out all equity.”
Not always. Many homes still have substantial equity left.
The Most Important Step Families Should Take
Every reverse mortgage is different.
The balance, interest rate, type of payout, and age of the borrowers all matter.
The first step should always be:
- Contact the loan servicer
- Request the current payoff balance
- Confirm timelines and options for heirs
From there, you can make informed decisions instead of reacting under pressure.
Final Thoughts
A reverse mortgage does not mean your family automatically loses the home.
But keeping it requires understanding the rules—and acting before deadlines pass.
At South River Mortgage, we help families:
- Understand their real options
- Coordinate payoffs or refinances
- Avoid costly mistakes during emotional transitions
If your family is dealing with an existing reverse mortgage and wants clarity…
Call us now and one of our reverse specialists will be happy to help.
Frequently Asked Questions: Reverse Mortgages and Keeping the Family Home
Does the bank own the house when there is a reverse mortgage?
No. The homeowner still owns the house. The lender only has a lien, just like with any other mortgage. Ownership does not transfer to the bank unless the loan is not repaid after it becomes due.
When does a reverse mortgage have to be paid back?
The loan becomes due when the last borrower:
- Passes away, or
- Moves out of the home permanently
At that point, heirs are given time to decide whether to keep or sell the home.
How much do heirs have to pay to keep the house?
Heirs must pay the lesser of:
- The total reverse mortgage balance, or
- 95% of the home’s current appraised value
This FHA rule protects families if the loan balance is higher than the home’s value.
Do I have to pay off the reverse mortgage immediately?
No. Heirs are typically given six months, with possible extensions (often up to one year total), to arrange a payoff, refinance, or sale.
Can a family member buy the home using a mortgage?
Yes. A family member can take out a traditional mortgage or other loan to pay off the reverse mortgage balance and keep the home.
Can someone refinance into another reverse mortgage?
Possibly. If the person keeping the home is 62 or older and meets eligibility requirements, they may be able to refinance into a new reverse mortgage to pay off the existing one.
Can we transfer the house into someone else’s name now?
Transferring ownership does not remove the reverse mortgage. In some cases, changing title can cause the loan to become due early. Always speak with a reverse mortgage specialist or estate attorney before changing the deed.
What happens if we sell the house instead?
The home is sold, the reverse mortgage is paid off from the proceeds, and any remaining equity belongs to the heirs. If the sale price is less than the loan balance, FHA insurance covers the difference.
Are heirs personally responsible for the reverse mortgage debt?
No. Reverse mortgages are non-recourse loans. Heirs are never required to pay more than the home’s value.
What should we do first if a reverse mortgage is involved?
Start by:
- Contacting the loan servicer
- Requesting the current payoff balance
- Confirming the timeline and available options
Getting accurate information early prevents rushed decisions later.
