If a owner of a home with a reverse mortgage dies, does the family have to leave?

As far as this issues is concerned, reverse mortgages are somewhat similar to traditional mortgages when it comes to certain aspects and different when it comes to others. It is understandable that both borrowers and heirs are interested in finding out what happens once the last remaining borrower passes away.

Most people believe that families have to leave right away once that happens but that is not true. It is important to understand that banks do not own the home of  a borrowers who passes away right away and as a result, the heirs will be able to have some choices on what to do once their family member has passed away.

Often, when the borrower dies, the lender may allow family up to one year to live in the home if they provide proof  that they are obtaining financing to pay off the remaining balance. However, if in 1 year the heirs cannot refinance then the lender may start foreclosure proceedings.

The heirs need to communicate with the lender and 100% transparency is always recommended. As the name of this type of mortgage suggests, lenders offered the borrower money but those funds need to be paid back in one form or another. The best solution for the lender would be receiving the money back and not having to resort to foreclosures, for example. Lenders usually only see foreclosure as a last resort and it should be obvious why.

If no other options have worked (in other words, if the heirs did not manage to secure the necessary funds) then the lender will have to sell the house as a last resort. If, after selling the house, the lender will not make enough money back, the heirs will not be liable and this fact alone should make it clear why foreclosures are not exactly a popular option among lenders.

As a conclusion, the people who say that families have to leave once the last remaining borrower passes away are wrong. As previously stated, lenders do not own the homes immediately and heirs have the right to make some choices on what happens with the home and loan.  Lenders will end up resorting to foreclosures if and only if heirs have not managed to obtain financing or pay them off on time within 1 year provided they have proved that they are actively refinancing. As a result, heirs need to ask how much money and time they have at their disposal to pay the lender and also to act accordingly.

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Moe Bedard
Founder at LoanSafe.org
My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications. I currently live in Carlsbad, California with my beautiful wife and children.
  • Cassandra


    I have a question about a reverse mortgage in the state of Florida. An elderly relative acquired a reverse mortgage on her home last year, but subsequently passed away. Due to her poor health conditions preceding her death family members moved into the home with her to help care for her. They were given an extension for payment of the mortgage, but they were under the impression that they home could be sold to a family member to keep it in the family (as the house is over 50 years old and she was the original owner). Due to their lack of information they are now being told that the house cannot be sold to a family member of the deceased. Is this true? Is there some kind of program or loophole that would allow the family to keep the house. Thank you for you time and I look forward to hearing from you.

  • Donna Young

    I have a question. My mother passed away (Washington, DC) On September 26, 2010. She had a reverse mortgage on the house. Do we have Until September 26, 2011 to either have paid off the loan or have sold the house to pay off the loan. Or If we have the house on the market September 26, 2011 will that be sufficient to avoid foreclosure.

  • http://foreclosureronareversemortgagebynutter,ownerisdeceased JULIA SPEEGLE

    WHAT DO I NEED TO DO SINCE MY MOTHER HAD A REVERSE MORTGAGE BY NUTTER AND WHEN SHE DIED THEY WERE IN FORECLOSER PROCEDURE. DO THEY NEED TO REFILE SINCE SHE PASSED AND i am the only child and all personal items go to me. once i am made executor. i was told that a add would need to be placed in the legalstje