With a reverse mortgage loan, can my heirs keep or sell my home after I die?
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It depends on whether there are coborrowers or an eligible nonborrowing spouse. If there are neither, to keep the home, heirs must pay the full loan balance. To sell it, they must repay the full loan balance, or at least 95 percent of its appraised value if the loan balance owed is more than the home value.
A reverse mortgage loan becomes due and payable after your death and after the death of any coborrowers or of an eligible nonborrowing spouse. Once your heirs receive a due and payable notice from the lender, they have 30 days to buy, sell, or turn the home over to the lender to satisfy the debt. This is the case for Home Equity Conversion Mortgages (HECMs), which are the most common type of reverse mortgage loan.
However, it might be possible for the timeline to be extended up to six months so your heirs can sell the home or obtain their own loan to purchase the home. Your heirs can consult a HUD-approved housing counseling agency or an attorney for more information.
What if my heirs need to sell a home that has a reverse mortgage?
Your heirs might not have the money pay off the loan balance when it is due and payable, so they might need to sell the home to repay the reverse mortgage loan.
When the loan is due and payable, your home might be worth more than the amount owed on the reverse mortgage. This means your heirs can sell the home, use the money to repay the loan, and keep the difference.
Or, when the loan is due and payable, your home might be worth less than the amount owed on the reverse mortgage. This means your heirs can pay off the loan by selling the home for at least 95 percent of the home’s appraised value. The rest of the loan is covered by the mortgage insurance that the reverse mortgage borrower paid during the duration of the loan.
What if my heirs want to keep a home that has a reverse mortgage?
When the loan is due and payable, your heirs can pay off the balance of the reverse mortgage and stay in the home. They might need to get a loan of their own to finance the purchase.
How to prepare
If you have a reverse mortgage loan and want to leave your home to your children, it’s important to talk to them now about their repayment options. You may also want to consider talking to a professional about creating an estate plan.