One of the most common questions with a reverse mortgage is how does the reverse mortgage affect my heirs? This is a common question from seniors who plan on leaving their home to their heirs. With a reverse mortgage your heirs will have options with your home once you are no longer living in your home. Here are some of your heir’s options with a reverse mortgage.

Option 1: Your heirs can sell the property – If your heirs choose to sell the property and the proceeds exceed the value of the home, they can keep the difference. For cases where the proceeds from the sale of the home are insufficient to pay off the loan, then the Department of Housing and Urban Development (HUD) absorbs the difference as long as it is an FHA insured loan. If it is not an FHA insured loan the difference would be covered by the lender. In either case the heirs are not responsible.

Option 2: Your heirs can keep the home – If your heirs choose to keep the home they will have to refinance 95 percent of the home’s value or the balance of the loan, whichever is lower.

Option 3: Your heirs do not have to be responsible for the home – What is great about the reverse mortgage is your heirs do not have to be responsible for the home. If your heirs do not want anything to do with your home after you are no longer living in the home then they will not be responsible for payment of any kind.

Reverse mortgage loans are non-recourse loans, which means that if the home is sold and the balance of the reverse mortgage loan is more than the sale price of the home, the Department of Housing and Urban Development (HUD) will not hold the heirs accountable for the difference. Any difference is forgiven entirely when the home is sold.

How the reverse mortgage affects heirs is a common question. Hopefully this information cleared that up. For a full list of other frequently asked questions please visit the One Reverse Mortgage frequently asked questions page.



Kristen Curzytek is a writer for Retiring Wise.  Give us a call at (800) 401-8114 to talk to one of our licensed professionals. They can discuss your financial situation with you and determine if a reverse mortgage makes sense for you and your financial goals.