Reverse Mortgages

Don’t Lose Your Inherited Home to a Reverse Mortgage

Reverse mortgages are often misunderstood, especially when it comes to what happens after the homeowner passes away. Many families assume that when someone dies with a reverse mortgage, the bank simply takes the home. That belief is widespread—but it isn’t accurate.

A reverse mortgage is a loan available primarily to homeowners aged 62 or older that allows them to access their home's equity without making monthly mortgage payments. Instead, the loan balance grows over time and becomes due when the homeowner sells the home, moves out permanently, or passes away.

When the borrower dies, the property does not automatically become the bank’s property. The home still belongs to the estate, and the heirs inherit it just like any other property with a mortgage attached.

What Heirs Can Do With an Inherited Home

If you inherit a home with a reverse mortgage, 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 property's value, the heirs can choose to walk away and let the lender take the home without owing additional money.  NOTE: You don't have to walk away. You can sell the home using a local real estate expert. This benefits the neighborhood because the home avoids becoming a bank repo, which supports the community. We have sold homes with no equity before.

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.

We have worked with many banks to sell homes and obtain the necessary extensions. If there is no communication, the bank will foreclose on the home. 

Let the Bald Brothers Team handle the communication for you.

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, fail to 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.

The Bald Brothers Team are Reverse Mortgage Sale experts and have helped many families maximize their inheritance by working seamlessly with the banks and the heirs to sell these homes for maximum value.

Have questions? Call us today at 833-305-2253 or download the checklist using the contact form below.