Inheriting a home with a reverse mortgage Heirs can keep the house. Here’s how it works.
When the last borrower on a reverse mortgage dies, the loan comes due, and the family has weeks, not months, to answer the servicer. Heirs who want the house can keep it, usually with a loan of their own, and on an FHA-insured HECM the payoff is capped at 95% of the home’s current appraised value. Here are the deadlines, the payoff rule, and how the heir’s loan works.
The short answer: yes, heirs can keep a parent’s home that has a reverse mortgage on it. On an FHA-insured HECM the family pays off the lesser of the loan balance or 95% of the home’s current appraised value, and HUD counts a transfer to an heir as a sale for that purpose. Most families pay it with a new loan in an heir’s name: a purchase loan from the estate or trust, or a refinance once title passes. Property taxes and insurance stay the estate’s job until then, and the servicer’s deadlines are short, so start the loan early.
HUD, “Inheriting a Home Secured by an FHA-insured Reverse Mortgage”: “Any post death transfer is considered a ‘sale’ for these purposes.” 24 CFR 206.125.
The servicer’s clock, step by step
The dates run from the servicer’s letters, not from the funeral or a probate filing. Call early; silence is what leads to foreclosure.
Tell the servicer
Call the servicer named on your parent’s loan statements and send the death certificate. Say you intend to keep the house, ask for a written payoff figure, and ask what the servicer needs from the family.
Answer within 30 days
The servicer’s letter gives the family 30 days to say what it will do: pay off the loan and keep the home, sell it, or hand it over. Answer in writing, even if the answer is “we are arranging a loan.”
Up to six months to finish
The family can have up to six months to sell or to close the heir’s loan. Apply for the loan now: appraisal, title and underwriting take weeks, and probate can take longer.
Up to two 90-day extensions
When a sale or a loan is under way, up to two 90-day extensions are available through the servicer, with proof such as a signed purchase contract or a loan approval. That is about a year at most.
Keep the house protected
Property taxes and homeowner’s insurance stay the estate’s responsibility until title transfers, and the house still needs basic maintenance. If taxes or insurance lapse, the servicer can pay them and add the cost to the loan balance.
Sources: HUD, “Inheriting a Home Secured by an FHA-insured Reverse Mortgage” (PDF); Consumer Financial Protection Bureau, “With a reverse mortgage loan, can my heirs keep or sell my home after I die?”. Servicers apply HUD’s limits case by case, so get every date in writing.
Balance or 95% of the value, whichever is less
Two families, the same $800,000 house. What it takes to keep it depends on which number is smaller.
| Same $800,000 house | Balance below the value | Balance above the value |
|---|---|---|
| Current appraised value | $800,000 | $800,000 |
| Reverse mortgage balance | $500,000 | $900,000 |
| 95% of the appraised value | $760,000 | $760,000 |
| Payoff to keep the house | $500,000 (the balance) | $760,000 (95% of the value) |
| Equity the family keeps | $300,000 | $40,000 |
| The rest of the balance | None | $140,000, covered by FHA insurance |
The balance keeps growing until the day it’s paid: interest and FHA mortgage insurance are added every month. While the balance is below 95% of the value, each month of delay comes out of the family’s equity. Once it’s above, the appraisal sets the payoff instead.
Ask the servicer early how the appraised value will be set, and get the payoff in writing. Closing costs for the heir’s own loan come on top of the payoff.
The loan is non-recourse, so the estate and the heirs never owe more than the home is worth. If the balance is above the value and nobody wants the house, it can be sold for as little as 95% of its appraised value, or handed back, and the family owes nothing more.
The rule is in 24 CFR 206.125. The examples are illustrations, not quotes.
A spouse who wasn’t on the loan
If a husband or wife who wasn’t a borrower still lives in the home, different rules may let them stay without paying off the loan. HUD requires a Non-Borrowing Spouse Certification within 30 days, so call the servicer before anything else. Eligible non-borrowing spouse, defined →
A jumbo reverse mortgage is different
The 95% rule is HUD’s, for FHA-insured HECMs. A proprietary jumbo reverse mortgage follows its own loan documents, including what heirs owe and how long they have. Read the note, or send it to me and I’ll tell you what it says.
Keep it, sell it, or hand back the keys
Every family ends up in one of three places. Decide early, because the steps and deadlines differ.
| Choice | What happens | What the family ends up with |
|---|---|---|
| Keep the house | Pay the lesser of the balance or 95% of the appraised value, usually with a new loan in an heir’s name. | The house, with a mortgage of its own. |
| Sell it | List it and sell; the reverse mortgage is paid from the sale. If the balance is higher than the value, the home can be sold for at least 95% of its appraised value. | Whatever equity is left after the loan and the selling costs. |
| Hand back the keys | Sign a deed in lieu of foreclosure, which transfers the house to the lender. | Nothing owed and nothing back: any equity goes with the house. |
When the house is worth well more than the balance, handing it back gives that equity away; sell it or keep it instead. A deed in lieu makes sense when the balance is above the value and no one wants the house.
Buy it from the estate, or refinance in your name
A reverse mortgage can’t be taken over by an heir, so keeping the house means a new loan, approved on you: your income, your credit, your debts, and an appraisal of the house. Which route fits depends on who holds title right now.
Buy from the estate or trust
If title is still in your parent’s name or a trust’s, you can buy the house from the estate or the trustee with a purchase loan. The price has to cover the payoff, and the lender’s down payment and closing cost rules apply. A living trust usually moves fastest. A house that goes through probate needs court papers before anyone can sell it, and the servicer’s clock keeps running.
Refinance once it’s yours
If title has already passed to you, a refinance in your name pays off the reverse mortgage. Fannie Mae’s usual six-month wait before a cash-out refinance doesn’t apply to a home you inherited. Whether a lender treats your refinance as cash-out depends on the file; I settle that before you apply.
When a standard loan doesn’t fit
- You’re 62 or older and will live there. A HECM of your own can pay off your parent’s loan, with no required monthly principal and interest payment, if the home has enough equity. From 55, a proprietary jumbo reverse mortgage may do the same. You would remain responsible for property taxes, homeowner’s insurance and maintenance. How reverse mortgages work →
- Your income is hard to document. Self-employed heirs can look at bank-statement loans, which cost more than a Fannie Mae or Freddie Mac loan. Heirs with large savings may qualify on the savings, sometimes under Fannie Mae and Freddie Mac rules. Qualifying on savings →
- You’ll keep it as a rental. An investor loan can qualify on the rent the house will bring. Prop 19 reassesses a home kept as a rental, so run the numbers with the new tax bill.
I arrange these loans through wholesale lenders and price the same file across several of them. I’ll also go through the servicer’s letters with you, so the loan and the deadlines line up. Purchase, refinance and reverse loans →
When several heirs inherit together
Often one heir wants the house and the others want their share in cash. The heir keeping it takes a loan large enough to pay off the reverse mortgage and pay the others, under a written agreement everyone signs.
Fannie Mae treats a buyout between co-owners as a limited cash-out refinance when all of them sign an agreement setting out the transfer and where the money goes, and a recent inheritance is excused from its usual twelve months of joint ownership. The heir who ends up owning the house can’t take any of the cash.
Make sure the heir keeping the house qualifies for the full amount before anyone signs. The agreement is only as good as the loan behind it.
Property taxes and the tax basis
Prop 19: move in within a year
If a child makes the house their own primary residence and files for the homeowners’ exemption within one year, the parent’s taxable value is kept, and only market value above that value plus $1,044,586 is added to the tax base (for transfers from February 16, 2025 through February 15, 2027). Kept as a rental or a second home, the house is reassessed at market value. Prop 19 and your tax base →
The stepped-up basis
Heirs generally receive a stepped-up basis: the home’s value at the date of death becomes their starting point for capital gains, which can keep the tax on a sale soon after inheriting small, and matters later if you keep the house. Interest paid when the reverse mortgage is paid off may be deductible on the right return. All of this is your CPA’s call. Taxes and a reverse mortgage →
I’m a mortgage broker, not a tax advisor or an attorney, and nothing here is tax or legal advice. Your county assessor decides every Prop 19 claim. Source: California State Board of Equalization, Proposition 19.
What to gather in the first two weeks
- The death certificate. The servicer needs it, and so will the title company.
- Every letter from the servicer, especially the one saying the loan is due, with the dates it gives.
- The latest reverse mortgage statement and a written payoff figure.
- The trust, or the will and the court papers naming who can act for the estate.
- The current property tax bill and the homeowner’s insurance policy, both paid up.
- For the heir’s loan: two years of income records, recent bank and retirement statements, and any written agreement among the heirs.
Bring what you have to the first call and I’ll tell you what’s missing. If the estate has an attorney, I’m glad to work with them directly.
Questions heirs ask about reverse mortgages
Do we have to pay the full reverse mortgage balance to keep the house?
How long do heirs have after a reverse mortgage borrower dies?
Can I get a regular mortgage to keep my parent’s house?
My siblings and I inherited the house. Can one of us keep it?
Will the property taxes go up when we inherit?
Does the 95% rule apply to a jumbo reverse mortgage?
Where these rules come from
- HUD, “Inheriting a Home Secured by an FHA-insured Reverse Mortgage” (PDF)
- 24 CFR Part 206, the federal HECM rules (§206.125, sale and payoff when the loan is due)
- Consumer Financial Protection Bureau, “With a reverse mortgage loan, can my heirs keep or sell my home after I die?”
- Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions (no waiting period for an inherited home)
- Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions (buying out a co-owner)
- California State Board of Equalization, Proposition 19
General information about the rules as published; servicers and lenders apply them case by case, and a proprietary reverse mortgage follows its own documents. Not legal or tax advice. In every case a reverse mortgage borrower remains responsible for property taxes, homeowner’s insurance, and home maintenance; failing those obligations can make the loan due and payable.
Written by Kenneth M. Adler
Broker & Owner, Ideal Financial, Inc. · 30 years in California lending · NMLS #240317 · CA DRE #01216608
Published October 9, 2026 · Last reviewed October 9, 2026
Every page on this site is written and maintained by me: the same person who answers the phone, runs your numbers, and handles your file start to finish. No call center, no hand-offs, no lead-selling. More about how I work →
More for families and heirs
Each page covers one decision in full.
Want me to go through the servicer’s letter with you?
Leave your number and I’ll go through the payoff, the deadlines and the loan you’d need to keep the house.
- A call back within minutes during California business hours
- Glad to work alongside the estate’s attorney
- An honest answer if a loan does not make sense for you
Fifteen minutes. Real numbers. Then you decide.
Tell me the scenario and I’ll tell you honestly whether this is the right tool. If it isn’t, you’ll leave the call knowing why, and I’ll point you at whatever is.
(818) 674-7284Prefer email?
Send a couple of sentences about your situation and I’ll reply personally, usually the same business day.
Contact Ken Book a call