Can You Still Leave Your House to Your Kids with a Reverse Mortgage?
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.
If you’ve worked hard to build equity in your home, it’s natural to want to pass it along to your kids someday.
But if you’re considering a reverse mortgage, you might be wondering: Will that still be possible?
The short answer is yes—but it works a little differently than with a traditional mortgage. Let’s break it down so you can make the decision with confidence.
How a Reverse Mortgage Works with Inheritance
When you take out a reverse mortgage, you’re borrowing against the equity in your home. You keep the title, and you can stay in the home as long as you live there, maintain it, and keep up with property taxes and insurance.
The loan comes due when you move out permanently, sell the home, or pass away. At that point, your heirs—often your kids—will have a decision to make about what to do with the home.
What Happens When You Pass Away
When the last borrower on the reverse mortgage passes away, the loan balance must be repaid. Your kids (or other heirs) have a few options:
- Keep the house – They can pay off the reverse mortgage balance, either with cash, refinancing into a traditional mortgage, or using other funds.
- Sell the house – They can sell the property, use the proceeds to pay off the reverse mortgage, and keep any money left over.
- Walk away – Reverse mortgages are non-recourse loans, which means your heirs will never owe more than the home’s value. If the loan balance is higher than what the home is worth, the lender simply takes the property—your kids aren’t stuck with a bill.
A Realistic Example
Let’s say your home is worth $400,000 when you pass away, and you owe $200,000 on your reverse mortgage.
Your kids could:
- Refinance and pay the $200,000 to keep the home
- Sell it, pay off the loan, and keep the remaining $200,000
- Hand the keys back if they don’t want the property or the hassle
The Key Takeaway
A reverse mortgage doesn’t automatically take your house away from your kids. It simply changes the way they inherit it. Instead of getting a home that’s free and clear, they’ll receive the home and the responsibility of paying off the loan balance.
If your goal is to leave your home to your kids, talk to them now. Make sure they know their options and have a plan in place.
At South River Mortgage, we’ve helped countless retirees use a reverse mortgage to improve their retirement without shutting the door on their inheritance plans.
You can still enjoy the financial benefits of your home’s equity today and leave your family with valuable options tomorrow.
Want to see how a reverse mortgage could work for you?
