What Happens to a Reverse Mortgage When the Owner Dies?

The loan comes due

A reverse mortgage lets a homeowner borrow against the home without monthly payments. The balance grows over time and is repaid when the borrower dies, sells or moves out. HUD's guidance for heirs of FHA-insured Home Equity Conversion Mortgages, or HECMs, says the loan becomes due at the borrower's death.

If there is a co-borrower or an eligible non-borrowing spouse, different rules may let that person stay. Check this first.

Your options as an heir

1. Keep the home. Pay off the loan in full, often with your own new mortgage.
2. Sell the home. The sale pays off the loan and you keep any surplus. If the loan is more than the home is worth, HECM rules let you sell for at least 95 percent of the current appraised value, and the lender accepts the net proceeds as satisfaction of the loan.
3. Deed in lieu. Transfer the home to the lender to avoid foreclosure, usually when there is no equity and no desire to sell.

The CFPB explains that the shortfall when a home is worth less than the loan is covered by the mortgage insurance the borrower paid, so heirs generally do not have to make up the difference on a HECM.

The timeline

Time is short, so contact the lender right away. HUD says the loan must be satisfied within 30 days of the borrower's death, and the lender may approve 90-day extensions when heirs document that they are actively selling or arranging payoff. The CFPB describes heirs as having 30 days after the due-and-payable notice to buy, sell or turn over the home, with the possibility of extensions of up to six months.

Meanwhile, property taxes and insurance remain the estate's responsibility until title is transferred. Keep them paid.

California details that matter

• Who can sign? If the home was in a living trust, the successor trustee can usually act without court. If not, you may need probate, or for a California primary residence worth up to $750,000 for deaths on or after April 1, 2025, a simpler court petition.
• Capital gains. Under IRS rules, inherited property generally takes a basis equal to its fair market value at death, which can greatly reduce taxable gain on a prompt sale.
• Keeping it? If a child inherits and wants to keep a parent's home, Proposition 19 rules decide whether the low property tax base can carry over. The child generally must move in as a primary residence within one year.

This is general information, not legal or tax advice. Talk to a California attorney, a CPA, or a HUD-approved housing counselor about your situation.

A checklist for the first 30 days

1. Notify the reverse mortgage lender of the death and ask for a payoff statement and the loan's due dates in writing.
2. Ask whether a co-borrower or eligible non-borrowing spouse changes the timeline.
3. Find out who has authority to sign: a successor trustee, an executor, or someone who still needs to be appointed by the court.
4. Keep property taxes, insurance and utilities paid, and secure the home if it is vacant.
5. Get a realistic value. That tells you whether there is equity to protect or whether the 95 percent rule applies.
6. If you need more time, ask the lender what documentation it needs to approve an extension.

Do these in writing and keep copies. Lenders move faster with an organized file.

Selling on a deadline

A reverse mortgage payoff is a sale with a clock attached. If the home needs work, there may not be time or cash to fix it before listing. Joe Hall can list the home for top dollar when the timeline allows, or take it off market to verified cash buyers when the deadline is tight, with an honest comparison of both. See your selling options or read about how to spot a real cash buyer.