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.
Whether you’re looking for a reliable way to pay for in-home care or you just want more of a financial cushion, a reverse mortgage may be an option.
Reverse mortgages give you a lump sum or an income stream that will be paid off after your death. If you’re considering this option, you might understandably be worried about a reverse mortgage’s impact on your loved ones. Here’s a closer look.
Are Your Heirs Responsible for the Mortgage Debt?
Many people considering reverse mortgages are hesitant because they believe their family members could be stuck with the debt after they die. Fortunately, this isn’t the case.
A reverse mortgage is what’s known as a non-recourse loan. The loan is secured by your home, but if the loan balance is greater than the value of your home at the time of your death, the lender may not try to recover additional funds from your heirs.
However, there is one caveat. If your heirs decide they want to keep the home, they will need to pay off the balance of the reverse mortgage, even if it exceeds the value of your home.
Handling a Reverse Mortgage After Your Death: Your Heirs Have Options
After your death, your lender is not allowed to pursue your heirs for additional funds if the home sale doesn’t cover the mortgage balance.
However, while your heirs are not responsible for paying the mortgage itself, they are responsible for deciding how they want to handle it.
Once your heirs receive a notice from your lender, they usually have 30 days to choose one of the following courses of action:
How Long Do Heirs Have to Decide?
After the borrower passes away, the lender notifies the estate or heirs in writing. From there, heirs generally have six months to decide how they want to resolve the loan.
If more time is needed to sell the home or arrange financing, most lenders (and HUD) allow for two 90-day extensions, provided the estate is actively working toward resolution.
This means your family usually has up to a full year to make arrangements—ample time to evaluate the market, talk with financial professionals, and make the best choice without rushing.
Selling the Home
It’s technically possible for the balance of your reverse mortgage to be greater than the value of your home at the time of your death. However, because real estate is almost always an appreciating asset, it’s far more likely that your home will be worth more.
In these situations, your heirs may be able to recover significant funds. They just need to sell the home, pay off the reverse mortgage with the proceeds, and keep the remainder for themselves.
Example: What Happens When a Borrower Passes Away
Let’s say Ellen, age 78, had a reverse mortgage balance of $210,000 on a home now worth $315,000.
When Ellen passes away, her two children inherit the property. They decide to sell the home for its full market value.
- Sale price: $315,000
- Reverse mortgage payoff: $210,000
- Remaining equity to heirs: $105,000
The lender receives repayment in full from the sale proceeds, and Ellen’s heirs keep the remaining $105,000 — tax-free.
This example shows how a reverse mortgage can support the homeowner during life while still leaving a meaningful inheritance.
Keeping the Home
Sometimes, your heirs may want to live in the home after your death. This is a viable option as long as they have a way to pay off the reverse mortgage without selling the home.
When heirs want to keep a home with a reverse mortgage, they will often do one of the following:
- Use their own funds
- Take out a traditional mortgage
Buying a home with a reverse mortgage can be confusing for someone unfamiliar with the process.
If you think your heirs may want to keep your home after your death, make sure to take the time to discuss their options for purchase. The last thing you want is for your loved ones to be blindsided while they’re already grieving.
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What If the Home Is Worth Less Than the Loan Balance?
If housing values drop or a home needs significant repairs, the reverse mortgage balance can exceed the home’s current worth.
In that case, your heirs have two main options:
- Sell the home for its current value. The lender will accept the sale proceeds as full repayment — even if it’s less than the balance.
- Sign the home over to the lender. Your heirs can walk away without owing a cent, and the FHA insurance covers the shortfall.
This “non-recourse” feature is one of the most powerful protections built into reverse mortgages. It ensures your heirs never inherit debt, only choices.
Signing the Home Over
Selling the home can sometimes be profitable for your heirs. However, in some cases (such as when the home has fallen into disrepair and its value has deteriorated), it may not be.
If your family members determine that going to the trouble of selling the home may not be worthwhile, they have a simpler option: they can simply sign the home over to the lender.
In doing this, your heirs forfeit any right to sell the house and to keep any proceeds that exceed the value of the mortgage. But if the mortgage balance is greater than the home’s value, this is often the best course of action.
How to Prepare Your Heirs in Advance
The best way to protect your family from confusion or stress later is to discuss your reverse mortgage with them now.
Here are a few key steps to take while you’re still living:
- Keep documentation accessible. Store your reverse mortgage agreement and lender contact information in one easy-to-find folder.
- Explain your intentions. Let your heirs know whether you’d prefer they sell, refinance, or transfer the home.
- Review timelines. Make sure they understand the 6–12 month window they’ll have to make decisions.
- Consult together. If possible, include your heirs in discussions with your loan counselor or lender so everyone understands the process.
When handled proactively, a reverse mortgage can provide financial relief and peace of mind for your entire family.
Wondering Whether a Reverse Mortgage Is Right for You?
A reverse mortgage can give some homeowners the confidence and financial security they need to enjoy their golden years.
However, like any other kind of mortgage, a reverse mortgage is a major decision — and you should fully understand the ramifications of that decision before you make it.
That’s where we come in. At South River Mortgage, we help homeowners find the right reverse mortgage for them, but that’s not all we do. We believe in taking the time to discuss your needs and goals and help you make the right decision for your financial future.
If you’ve decided on a reverse mortgage, get an instant quote here today (totally free) to get started. Just want to learn more about the process? Get in touch with us at 855-212-9114. We’ll discuss your options and our licensed reverse mortgage experts will answer all your questions, no pressure or obligation.
FAQ – Reverse Mortgages and Heirs
Do heirs inherit reverse mortgage debt?
No. Reverse mortgages are non-recourse loans, meaning heirs are never personally responsible for paying back more than the home’s value.
Can heirs buy the home for less than the loan balance?
Yes. FHA rules allow heirs to purchase the home for 95% of its current appraised value or the loan balance, whichever is less.
How long do heirs have to sell or refinance the property?
Typically, six months, with up to two 90-day extensions available upon request.
What if multiple heirs disagree on what to do?
The estate’s executor will coordinate with the lender. Communication early on helps avoid disputes.
Can I set aside funds to help my heirs keep the home?
Yes. Some borrowers use part of their reverse mortgage proceeds to create a small inheritance fund or insurance policy to give their heirs more flexibility later.
