When the last borrower on a reverse mortgage passes away, the loan comes due. That does not mean the family loses everything. Here is what heirs in Kansas and Missouri should expect, step by step.
What heirs can do
- Sell the home and keep whatever equity is left after the loan is paid off
- Keep the home by paying off the loan, often with a regular mortgage or other funds
- Pay 95% of the appraised value if the loan balance is higher than the home is worth, and keep the house
- Hand the home to the lender through a deed in lieu, if there is no equity and no one wants the house
The timeline
The loan servicer is notified of the death and contacts the estate. Heirs typically have about 30 days to say what they plan to do and up to 6 months to sell or refinance. If heirs are actively working on a sale or refinance, extensions are often available with servicer and HUD approval.
Call the servicer early. Most problems for heirs come from waiting too long or not answering letters.
Can heirs owe more than the house is worth?
Not with an FHA-insured HECM. It is a non-recourse loan. If the balance is higher than the home sells for, FHA insurance covers the difference. Heirs are not personally on the hook for the shortfall, and other estate assets are not used to pay it.
Common questions
What if a spouse is still living in the home?
A spouse who was a co-borrower keeps the loan in place. A spouse who was not on the loan may be able to stay as an eligible non-borrowing spouse if specific HUD requirements are met.
Do heirs have to repay the loan right away?
No. There is a set period to decide, sell or refinance, and extensions are often available if heirs are actively working on it.
Who should heirs contact first?
The loan servicer listed on the monthly reverse mortgage statement. Steve can also help heirs understand their options for a sale or refinance.
Related: How it works · Who qualifies · Costs · For families · FAQ · Service areas
Talk to a real person in Kansas City
Steve Clune is a licensed loan officer for Kansas and Missouri. Call or text with your questions. If you miss him, send a text and he’ll get back to you.