Reverse Mortgages and Heir Inheritance

A common concern for homeowners considering a reverse mortgage is making sure that their heirs not be saddled with debt and will inherit the home.

Obligations for heirs

When the home is worth more than the reverse mortgage balance

The heirs can refinance the reverse mortgage into a traditional mortgage and keep the home. Otherwise, the estate can sell the home, pay the balance of the reverse mortgage, and keep the remainder of the home's value.

The estate inherits the property
as normal with a reverse mortgage

The estate has six months to arrange the sale or refinance of the home. An extension to one year can also be requested.

For example:

• A $200,000 home is inherited by the estate with a $125,000 reverse mortgage balance.
• The heirs decide not to keep the home.
• The heirs sell the home for $200,000, pay the lender $125,000, and keep $75,000.

When the home is worth less than the reverse mortgage balance

The estate has no obligation. The home can be turned over to the lender who will sell the home to repay as much of the balance as possible. Or, the heirs can refinance the reverse mortgage into a traditional mortgage and keep the home.