Reviewed by Dan Frio, NMLS #246527, 38 years in mortgages · October 15, 2026
Families often worry about what happens to the house after a parent passes away. The good news is that the rules are clear, and they protect the family.
A reverse mortgage does not change who inherits the home. It only means there is a loan to settle, just like any other mortgage.
When the last borrower passes away, the loan becomes due. Heirs can choose one of three paths:
Heirs who want to keep the home owe the lesser of the full loan balance or 95 percent of the home's current appraised value. The Consumer Financial Protection Bureau confirms this rule in its guidance for families.
Suppose the loan balance is $350,000 and the home is appraised at $300,000. The heirs can settle the debt by paying 95 percent of the appraised value, which is $285,000. They owe nothing more, even though the balance was higher.
Now flip it. If the balance is $200,000 and the home sells for $300,000, the loan is paid off and the extra $100,000 goes to the estate, before any selling costs.
Heirs generally have around six months to decide what to do. If they are actively working to sell the home or arrange a payoff, and they stay in touch with the servicer, they can usually request extensions.
The key is to talk to the servicer early and keep talking. Silence is what causes problems.
A HECM is non-recourse. If the home sells for less than the balance, FHA insurance covers the difference. Heirs are never billed personally for the shortfall. Their own savings, homes, and income are not on the line.
A younger spouse who was not on the loan may be able to stay in the home under the eligible non-borrowing spouse rules. Read reverse mortgage when one spouse is under 62 to learn how that works.
Yes. They can keep it by paying off the balance or refinancing. They owe the lesser of the loan balance or 95 percent of the current appraised value.
No. A HECM is non-recourse. FHA insurance covers any shortfall, and heirs are never billed personally.
Generally around six months. If they are actively working to sell or pay off the loan, they can usually request extensions.
Yes. If the home sells for more than the balance, every dollar of the difference goes to the estate.
Yes. Heirs can give the home to the lender, often through a deed in lieu of foreclosure, and owe nothing.