What happens to your house after a reverse mortgage?
After a reverse mortgage, heirs 
typically sell the house to repay the loan, but they can also pay it off or give the house to the lender. The decision depends on the loan balance, home value, and presence of co-borrowers/spouses. Communicate with family and seek professional guidance for informed choices.
For some qualified homeowners, a reverse mortgage or HECM loan can be a helpful financial tool for eligible seniors looking to access the equity they’ve built up in their homes. However, understanding what happens to the house after taking out a reverse mortgage is crucial for informed decision-making.
Key Points to Understand on a Reverse Mortgage:
- Ownership remains with you: Unlike a traditional mortgage, you retain ownership of the house with a reverse mortgage.
- Loan becomes due: Upon certain events, like passing away or moving out permanently, the loan becomes due and needs to be repaid.
Options Heirs have after a Reverse Mortgage:
- Sell the house: This is the most common option. Proceeds from the sale are used to pay off the loan balance, with any remaining amount going to the heirs.
- Pay off the loan: Heirs can choose to pay off the loan in full to keep the house. This option may require them to secure other financing.
- Deed-in-lieu of foreclosure: In some cases, heirs can choose to surrender the house to the lender in exchange for avoiding foreclosure.
Some Factors That May Affect Your Options On A Reverse Mortgage:
- Loan balance vs. home value: If the loan balance is less than the home’s value, heirs can keep the remaining equity after the sale. If the balance is higher, they may need to contribute additional funds to pay it off fully.
- Number of co-borrowers: If there are surviving co-borrowers, they may be able to stay in the house as long as they meet loan requirements.
- Presence of a spouse: Surviving spouses of reverse mortgage borrowers have rights. If you were married to the borrower at the time of the loan, you may have the right to stay in the home after the borrower dies. Even if you were not listed on the reverse mortgage loan, this protection still applies. *see below
Check out our: Reverse Mortgage Information and FAQs
Important Considerations Before Using A Reverse Mortgage:
Discuss with family: It’s crucial to have open communication with family members about your reverse mortgage and their preferences regarding the house after your passing.
Seek professional guidance: Consulting a mortgage advisor that specializes in reverse mortgages can help you navigate the process and understand your options.
Carefully weigh options: Each option has its own advantages and disadvantages. Consider factors like financial capability, emotional attachment to the house, and future plans for your heirs before making a decision.
Conclusion - After a Reverse Mortgage
In conclusion, by understanding the implications of a reverse mortgage on your property you can ensure informed decision-making and a smoother transition for your loved ones after you’re gone.
*not intended to be legal advice. Your area maybe different. Always contact a legal expert on such matters.
At the end of the reverse loan term, some or all of the property’s equity won’t belong to the borrower, and they may need to sell or transfer the property to repay the proceeds of the reverse mortgage. The Loan servicer could add an applicable reverse mortgage origination fee, mortgage insurance premium, closing costs, or servicing fees to the balance of the loan which will grow, along with the interest, over time. Interest isn’t tax deductible until all or part of the loan is repaid. Failing to pay property taxes, insurance, and maintenance might subject the property to a tax lien, foreclosure, or other encumbrance since the borrower retains the title.
All loans subject to underwriter approval; terms and conditions may apply. Subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.
Contact the Joseph Small and Team to learn more about using a Reverse Mortgage in Arizona, Alabama, Colorado, Florida, North Carolina and South Carolina. Joseph Small is licensed in the following States: AZ, AL, CO, FL, NC, SC.
Equal Opportunity Lender. We are pledged to the letter and spirit of the United States policy for the achievement of equal housing opportunity throughout the nation. We encourage and support an affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status, or national origin.
The information provided herein has been prepared by a third party company and has been distributed for education purposes only. The positions, strategies or opinions of the author do not necessarily represent the positions, strategies or opinions of Patriot Pacific Financial Corp or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction