What Heirs Can Do With an Inherited Home
Watch the video here: https://www.youtube.com/watch?v=0dRPBq3c98g&t=6s
If you inherit a home that has a reverse mortgage on it, you generally have three primary options.
1. Sell the home.
The most common solution is to sell the property, pay off the reverse mortgage with the sale proceeds, and keep any remaining equity.
2. Refinance and keep the home.
If heirs want to keep the property, they can refinance the reverse mortgage into a traditional mortgage and continue owning the home.
3. Walk away if there is no equity.
Reverse mortgages are typically non-recourse loans, meaning heirs are not responsible for paying more than the home is worth. If the loan balance exceeds the value of the property, the heirs can choose to walk away and let the lender take the home without owing additional money.
The Timeline for Heirs
Once the borrower passes away, the lender sends a notice that the loan is “due and payable.” From that point, heirs typically have time to decide what they want to do with the property. In many cases, they are given several months—and sometimes extensions—to sell the home or refinance the loan.
The key is communication. As long as heirs stay in contact with the loan servicer and demonstrate they are actively working toward a solution, lenders generally allow time for the process.
The Big Myth About Reverse Mortgages
One of the biggest myths surrounding reverse mortgages is that the bank automatically takes the house when the borrower dies. In reality, the estate still owns the property and the heirs control what happens next.
The lender only takes possession if the heirs decide not to act, do not communicate, or choose to walk away from the property.
The Bottom Line
A reverse mortgage does not mean your family will lose the home. When the borrower passes away, the heirs still inherit the property and have options. They can sell the home, refinance it and keep it, or walk away if there is no equity.
Understanding these options can prevent families from making costly assumptions and ensure they make the best financial decision when dealing with an inherited home.
