What Happens to a Reverse Mortgage When I Die?
The lender does not automatically get your house when you die. The reverse mortgage balance becomes payable according to the mortgage terms, and your estate generally deals with the outstanding mortgage and the property.
← Back to Reverse Mortgage QuestionsYour Estate Still Has an Interest in the Home.
When the reverse mortgage becomes payable, the outstanding principal, accumulated interest and any other amounts owing under the mortgage need to be dealt with. What happens next depends on what the estate decides to do with the property and the specific lender requirements.
The Mortgage Balance Is Confirmed
The lender provides the amount required to repay the reverse mortgage, including the outstanding principal and accumulated interest.
The Estate Deals With the Property
The executor or estate representative will generally be responsible for dealing with the home and the mortgage according to the estate and mortgage terms.
The Home May Be Sold
If the estate sells the property, the reverse mortgage is typically repaid from the sale proceeds as part of the closing.
The Mortgage Can Be Repaid Another Way
Depending on the circumstances, the estate or beneficiaries may have other resources available to repay the mortgage rather than selling the home.
Remaining Equity Belongs to the Estate
After the reverse mortgage and applicable costs are paid, the remaining equity in the property belongs to the estate.
The Mortgage Terms Matter
Repayment timing and requirements vary by lender and mortgage contract, so the actual loan documents should be reviewed.
A Reverse Mortgage Can Reduce the Equity Left to Your Estate.
Because interest can accumulate over time, the reverse mortgage balance may grow while you remain in the home. That means there may be less equity available to your estate than there would have been without the mortgage.
That is different from saying the lender takes the house. The mortgage is a debt secured against the property, and the remaining equity after that debt and applicable costs are paid belongs to the estate.
The home's value at the time it is dealt with affects how much equity remains.
The outstanding principal and accumulated interest reduce the equity available to the estate.
If the home is sold, normal transaction and closing costs also affect the final amount remaining.
Whatever remains after the mortgage and applicable costs are dealt with stays with the estate.
The Surviving Homeowner's Status Matters.
If two people own the home and one dies, the outcome can depend on how the reverse mortgage was structured and whether the surviving homeowner is also a borrower under the mortgage.
Both Owners Are Borrowers
If both homeowners are borrowers, the death of one borrower does not necessarily mean the mortgage immediately has to be repaid. The mortgage terms determine what happens next.
Only One Owner Is a Borrower
If the surviving homeowner is not a borrower under the reverse mortgage, the situation can be different and the mortgage documents need to be reviewed carefully.
Ownership Matters
How title to the property is held can affect how the home is dealt with after a homeowner dies.
Contact the Lender
The lender should be notified so the estate or surviving homeowner can understand the specific requirements and available timeframes.
Review the Mortgage Documents
The actual reverse mortgage contract is the best source for the lender's repayment and surviving-borrower provisions.
Plan Ahead
Discussing the reverse mortgage with family and estate professionals beforehand can reduce uncertainty later.
The Lender Does Not Automatically Inherit Your Home.
A reverse mortgage is repaid according to its terms. If the property is sold, the mortgage is paid from the proceeds and the remaining equity belongs to the estate. The exact process and timing depend on the lender, mortgage contract and circumstances of the homeowners.
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