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.
One of the biggest questions people ask about a reverse mortgage isn’t about today.
It’s about what happens later.
What if you get sick?
What if you need more care?
What if you have to move into a nursing home?
And perhaps the biggest question:
“What happens to my home and my reverse mortgage?”
These are important questions.
The good news is that moving into a nursing home does not automatically mean you have to pay off your reverse mortgage right away.
But there are rules you need to understand.
What Happens If I Need to Move Into a Nursing Home?
A reverse mortgage requires you to live in your home as your principal residence.
That means your home is still considered your main home.
If you need to spend time in a hospital, rehabilitation center, assisted living facility, or nursing home, the length of your stay matters.
For a HECM reverse mortgage, if you are away from your home for more than 12 consecutive months because of physical or mental illness, the loan can become due and payable if there is no co-borrower living in the home.
That doesn’t mean you should wait until the 12-month mark to think about it.
If you or your family believes a nursing home stay could become permanent, it’s important to contact your reverse mortgage servicer and understand your options.
What If My Spouse Still Lives in the Home?
This is where things can get more complicated.
If your spouse is a co-borrower on the reverse mortgage and continues to live in the home, your move into a nursing home generally does not cause the loan to become due just because you moved out.
The co-borrower can continue living in the home as long as the reverse mortgage requirements are met.
But what if your spouse is not a co-borrower?
There are special HUD rules that may allow an eligible non-borrowing spouse to remain in the home.
Whether your spouse qualifies depends on several factors, including when the loan was made and whether your spouse meets HUD’s requirements.
This is one reason it’s so important to understand your loan before a major change happens.
What If I Have to Leave My Home Permanently?
Sometimes a nursing home stay starts as temporary.
Then things change.
You may realize that you aren’t going back home.
If you permanently move out, your reverse mortgage may become due.
The same can happen if you move out for more than 12 consecutive months because of a medical condition and there is no co-borrower living in the home.
At that point, you generally have choices.
You may:
- Sell the home
- Pay off the reverse mortgage
- Have someone else refinance or otherwise provide funds to pay off the loan
- Take other steps allowed under the loan and HUD rules
The important thing is not to ignore the situation.
Your lender or servicer can explain what needs to happen and what deadlines apply.
What Happens to the House If I Can’t Live There Anymore?
This is often the hardest part.
You may have lived in your home for 30, 40, or even 50 years.
It may be where you raised your children.
You may not want to sell it.
But if you can no longer live there as your principal residence, the reverse mortgage may eventually need to be paid off.
If the home is sold, the sale proceeds can be used to pay off the reverse mortgage.
If there is money left after the loan is paid off and other selling costs are handled, that money generally belongs to you or your estate.
And there is an important protection built into a federally insured HECM:
You or your heirs generally won’t have to pay more than the value of the home.
What If I Leave the Home to My Children?
This is another question worth planning for before you need a nursing home.
A reverse mortgage does not prevent you from leaving your home to your children or other heirs.
But the reverse mortgage doesn’t disappear when the home passes to them.
When the last surviving borrower dies, the reverse mortgage generally becomes due and payable.
Your heirs then need to decide what they want to do with the home.
They generally have three choices.
- Keep the home.
If your children want to keep the house, they generally need to pay off the reverse mortgage.
They may use their own money, another loan, or other funds available to them.
- Sell the home.
Your heirs can sell the home and use the proceeds to pay the reverse mortgage.
For an FHA-insured HECM, if the loan balance is more than the home’s value, eligible heirs can generally satisfy the loan by selling the home for at least 95% of its current appraised value, subject to HUD’s rules.
- Turn home over to the lender.
There are also situations where the estate may use a deed in lieu of foreclosure to satisfy the loan.
The important point is that your heirs should not simply walk away from the house or ignore letters from the reverse mortgage servicer.
What Do My Heirs Need to Do?
This is something you may want to discuss with your family now.
If you have a reverse mortgage and you pass away, your heirs should:
- Contact the reverse mortgage servicer
The servicer needs to know that the borrower has died.
They can explain the next steps and provide information about the loan balance and the options available to the estate.
- Find out how much is owed
Your heirs need to know the current reverse mortgage balance.
Remember, the balance may be higher than the amount originally borrowed because interest and other loan costs can be added over time.
- Decide whether they want to keep or sell the home
This is the big decision.
If they want to keep the home, they need to determine how they will pay off the reverse mortgage.
If they don’t want the home, selling it may be the simplest option.
- Don’t wait until the last minute
Once the loan becomes due, there are deadlines that matter.
The CFPB says that after heirs receive the lender’s due-and-payable notice, they generally have 30 days to decide whether to buy, sell, or otherwise satisfy the loan, although the timeline may be extended in certain circumstances.
HUD rules also provide for additional time in certain situations when an estate is actively working to sell the property.
That’s why communication with the servicer is so important.
What If My Family Wants to Keep the House?
This is something you should talk about before a nursing home or other major life event happens.
If your children want to keep your home after you die, they will need to understand that they don’t simply inherit the house free and clear.
They inherit the home subject to the reverse mortgage.
That means they will need to find a way to satisfy the loan if they want to keep the property.
This could mean using savings, getting another mortgage, or using other available funds.
And because every family’s situation is different, your heirs may want to talk with an attorney, financial professional, or HUD-approved housing counselor about their options.
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What If the Home Is Worth Less Than the Reverse Mortgage Balance?
This is one of the biggest fears families have.
Imagine the reverse mortgage balance is $300,000.
But the home is worth only $250,000.
Does your family have to come up with the extra $50,000?
For an FHA-insured HECM, the answer is generally no.
The HECM has a non-recourse feature. In simple terms, the borrower or heirs generally cannot be required to pay more than the value of the home.
There are specific rules for how the loan is handled when the balance is greater than the home’s value.
That’s one reason it is important for your heirs to work with the servicer rather than simply assuming they owe the difference.
What If I Eventually Decide to Sell My Home?
You can sell your home.
A reverse mortgage does not mean the lender owns your house.
You still own the home.
But when you sell it, the reverse mortgage generally has to be paid off.
The amount left after paying the reverse mortgage and other costs would belong to you or your estate.
This is important to remember when thinking about your long-term plans.
A reverse mortgage isn’t a promise that you will stay in the home forever.
It’s a loan that can give you access to some of the equity you’ve built while you live there.
What About the Cost of a Nursing Home?
The cost of long-term care can be one of the biggest financial concerns in retirement.
A reverse mortgage may provide access to home equity that could potentially be used for many purposes.
But there is an important distinction:
A reverse mortgage does not pay for a nursing home automatically.
The money you receive from a reverse mortgage can generally be used for your own purposes, but you should consider your complete financial picture before using home equity to pay for long-term care.
You may also want to understand how your income, assets, and any government benefits you receive could be affected.
Because those rules can be complicated, consider speaking with a qualified financial or benefits professional before deciding.
Planning Ahead Can Make a Difficult Time Easier
Nobody likes to think about needing a nursing home.
But planning for the possibility can make things easier for you and your family.
If you have a reverse mortgage, make sure your family knows:
- Who services your reverse mortgage
- Where your loan documents are kept
- What your monthly obligations are
- Who to contact if you move into a care facility
- What should happen to the home if you cannot return
- Whether your spouse is a co-borrower
- What you want your heirs to do with the home
You don’t have to make every decision today.
But having a plan can prevent your family from having to figure everything out during a difficult time.
A Reverse Mortgage Doesn’t Have to Mean Giving Up Your Home
For many people, the goal of a reverse mortgage is simple:
Stay in the home you love while making retirement finances a little easier.
But life can change.
You may eventually decide to move closer to family.
You may need assisted living.
You may need nursing care.
Or you may simply decide that it’s time for a different home.
A reverse mortgage can be part of your retirement plan, but it’s important to understand what happens when your plans change.
And if you’re thinking about getting a reverse mortgage, it’s worth asking not only:
“How can this help me today?”
but also:
“What happens if I can’t live here someday?”
Knowing the answer can give you and your family much more confidence.
The Bottom Line
Needing a nursing home does not automatically mean your reverse mortgage must be paid off immediately. But if you are away from your home for more than 12 consecutive months because of illness, or permanently move out, the loan may become due. A co-borrower or qualifying non-borrowing spouse may have different protections.
If you’re considering a reverse mortgage, think about your future plans as well as your needs today. Make sure you understand what could happen if you need long-term care — and make sure your family knows what to do with the home and the loan if you can no longer live there.
Have questions about how a reverse mortgage can help you? Our experts are ready to listen to your situation at 855-212-9114.
See What You May Qualify For
If you’re exploring how home equity could help support your future care planning, the best next step is simple: run the numbers.
You can get a personalized estimate in seconds using our free calculator. No pressure. No obligation.
Get your instant reverse mortgage quote today and see what may be possible.
FAQS
Can I keep my reverse mortgage if I move into a nursing home?
Possibly. A temporary stay does not automatically make the loan due. But if you are away from the home for more than 12 consecutive months because of illness, the loan may become due if there is no co-borrower living in the home.
What if my spouse still lives in the home?
If your spouse is a co-borrower, they can generally remain in the home as long as they meet the loan requirements. A non-borrowing spouse may also have protection if they meet HUD’s requirements.
Can my children inherit my home if I have a reverse mortgage?
Yes. But the reverse mortgage generally becomes due after the last surviving borrower dies. Your heirs can choose to keep the home by satisfying the loan, or they can sell the home and use the proceeds to repay it.
What happens if my heirs don’t have enough money to pay off the reverse mortgage?
They may be able to sell the home to satisfy the loan. With an FHA-insured HECM, heirs generally won’t have to pay more than the value of the home, subject to the program’s rules.
How long do heirs have to deal with the reverse mortgage?
They should contact the servicer as soon as possible. After receiving the required notice, heirs generally have 30 days to decide what they want to do, with possible extensions in certain situations.
Does the lender own my home if I have a reverse mortgage?
No. You remain the owner of your home. The home is used as security for the loan, just like with a traditional mortgage.
