Selling a house with a reverse mortgage after the owner dies: the heirs' timeline
Short answer
When the last borrower on a HECM reverse mortgage dies, the loan becomes due and payable. The heirs aren't personally liable, but they have to act: once the servicer sends its due-and-payable notice, they have 30 days to pay the loan off, sell the house, or deed it to the lender, and more time can be approved to finish a sale. If the house is worth less than the loan, heirs can sell it for as little as 95% of its appraised value and owe nothing more.
What a HECM is, and why the rules are federal
Most reverse mortgages are Home Equity Conversion Mortgages (HECMs) (CFPB), which carry Federal Housing Administration mortgage insurance. Because of that insurance, HUD's regulations in 24 CFR part 206 set what happens after the borrower dies, in Pennsylvania, New Jersey, Delaware and Florida alike. State law still governs probate and who can sign for the estate.
The federal rules that protect homeowners who fall behind on a regular mortgage, such as the 120-day wait and loss mitigation reviews, don't apply to reverse mortgages (12 CFR 1024.30(b)(2)). The HECM rules below take their place.
When the loan becomes due and payable
The HECM mortgage must say the balance is due and payable in full if a borrower dies and the property isn't the principal residence of at least one surviving borrower (24 CFR 206.27(c)(1)). Two situations change that:
- A co-borrower is still living in the home. The loan continues while they meet its obligations (CFPB).
- An eligible non-borrowing spouse. For loans with FHA case numbers assigned on or after August 4, 2014, a spouse named in the loan documents who was married to the borrower at closing, stayed married, and still lives in the home may qualify to stay. The due-and-payable status is deferred while they qualify, but they get no more loan money (CFPB; 24 CFR 206.27(c)(3)).
Otherwise, the clock starts with the death. Tell the servicer promptly; the statement or loan papers list its contact information.
The heirs' timeline under HUD's rules
| Step | What happens | Rule |
|---|---|---|
| Servicer notifies HUD | Within 60 days of the loan becoming due and payable on death | 24 CFR 206.125(a)(1) |
| Due-and-payable notice to the estate and heirs | Within 30 days after notifying HUD (or getting HUD approval, if needed) | 206.125(a)(2) |
| Heirs' first response window | 30 days from the notice to pay the balance, sell, or give a deed in lieu | 206.125(a)(2)(i)–(iii) |
| Appraisal | Ordered by the servicer within 30 days of a request in connection with a sale; at the servicer's expense once the loan is due, reimbursed from the sale | 206.125(b) |
| Extra time to sell | CFPB says the timeline may be extended up to six months so heirs can sell or get their own loan | CFPB |
| Foreclosure deadline | The servicer must start foreclosure within six months of the due date, or within additional time HUD approves | 206.125(d)(1) |
| Deed in lieu | The lender must accept one if it's recorded within 9 months of the due date and title is good and marketable; HUD may offer a cash-for-keys incentive for a deed within 6 months | 206.125(f)(1) |
Any time beyond the six-month foreclosure deadline has to be approved by HUD (206.125(d)(1)), so ask the servicer early if you need it, and keep written proof that you're actively selling, such as a signed contract.
The heirs' four options
1. Sell the house
If the house is worth more than the loan balance, heirs sell it, the closing pays the servicer, and the estate keeps the difference (CFPB).
If the house is worth less than the balance, HUD's rule lets the heirs sell for an amount HUD sets by notice, which can't exceed 95% of the appraised value, with the net proceeds applied to the loan (24 CFR 206.125(a)(2)(ii)). The lender then satisfies the mortgage, provided there are no other junior liens and all the net proceeds go to the lender (206.125(c)). The mortgage insurance the borrower paid for covers the rest (CFPB). The same rule caps allowable closing costs at the greater of 11% of the sales price or a fixed amount HUD sets.
This is the part most people don't expect: an underwater reverse mortgage doesn't leave the family owing money. The HECM must provide that the borrower has no personal liability for the balance, the lender can enforce the debt only through sale of the property, and there's no deficiency judgment after foreclosure (24 CFR 206.27(b)(8)).
2. Keep the house
Heirs who want to keep the house pay the loan off, often with their own new mortgage (CFPB). The CFPB describes the amount as the full loan balance or 95% of the appraised value, whichever is less (CFPB). Ask the servicer to confirm the exact payoff in writing.
3. Give the lender a deed in lieu of foreclosure
If no one wants the house and selling isn't practical, the estate can deed it to the lender. HUD's rule requires the lender to accept it if it's recorded within 9 months of the due date and title is good (24 CFR 206.125(f)). Any equity is lost this way, so compare it with a sale first.
4. Do nothing
The servicer then forecloses. The servicer must bid at least the lesser of the loan balance plus expenses or the current appraised value (24 CFR 206.125(d)(4)). Any equity above the debt is at risk in a foreclosure auction, so this is usually the worst option when the house is worth more than the loan.
Who can sign: probate still matters
HUD's rules let "the borrower or other party with legal right to dispose of the property" sell (24 CFR 206.125(c)). For heirs, that usually means an executor or administrator appointed by the county probate office. If there was no will, see selling a house when someone died without a will. Our state guides cover the probate step: Pennsylvania, New Jersey, Delaware and Florida.
Start probate early. The 30-day and six-month windows run whether or not letters have been issued, and a buyer's title company will need to see who has authority before closing.
A short checklist for heirs
- Notify the servicer of the death and ask for the loan balance and the date the loan became due.
- Open the estate and get letters, or confirm who already has authority.
- Request the appraisal in writing as soon as you decide to sell.
- Get a written payoff, and ask whether HUD's 95% figure applies.
- Check for other liens, such as unpaid property taxes or judgments, which must also be cleared; see selling with liens or judgments.
- Talk to a HUD-approved housing counselor or an attorney; the CFPB suggests both for heirs (CFPB).
What our process looks like
We buy inherited houses as-is and close through a licensed title company that pays the reverse mortgage servicer directly. If the house is underwater, we can work with the servicer's appraisal and the HUD sale rules. We buy in Pennsylvania, New Jersey, Delaware and Florida.
Frequently asked questions
How long do heirs have to sell a house with a reverse mortgage?
After the servicer's due-and-payable notice, heirs have 30 days to pay off, sell or deed the house to the lender. The CFPB says the timeline may be extended up to six months to sell or get financing, and the servicer must start foreclosure within six months of the due date unless HUD approves more time.
Do heirs have to pay back a reverse mortgage if the house is worth less?
No. A HECM borrower has no personal liability and the lender can collect only through the house. Heirs who sell can pay off the loan with a sale for at least 95% of the appraised value, and FHA mortgage insurance covers the shortfall.
What is the 95% rule for a reverse mortgage?
When a HECM is due and payable, the house can be sold for an amount HUD sets that doesn't exceed 95% of its appraised value, with the net proceeds going to the lender. That satisfies the loan even if the balance is higher.
Can heirs keep a house with a reverse mortgage?
Yes, by paying off the loan, often with their own mortgage. The CFPB describes the amount as the full balance or 95% of the appraised value, whichever is less; confirm the payoff with the servicer in writing.
Can a surviving spouse stay in the home?
If the spouse was a co-borrower, yes, as long as the loan obligations are met. A spouse who wasn't a borrower may qualify as an eligible non-borrowing spouse, depending on when the loan was made and whether HUD's conditions are met.
What happens if the heirs do nothing?
The servicer forecloses. Any equity above the loan is at risk at the foreclosure sale, so selling or giving a deed in lieu is usually better than waiting.
Sources
- Electronic Code of Federal Regulations, 24 CFR 206.27 (mortgage provisions) and 24 CFR 206.125 (acquisition and sale of the property)
- Consumer Financial Protection Bureau, With a reverse mortgage loan, can my heirs keep or sell my home after I die?, What happens to my reverse mortgage when I die? and What happens to my reverse mortgage when I die? (short answer)
- Consumer Financial Protection Bureau, Regulation X § 1024.30 (scope)
- U.S. Department of Housing and Urban Development, Find a housing counselor
This is general information, not legal or financial advice. HECM rules depend on when the loan was made and who signed it, and servicers handle extensions case by case. Talk to the servicer, a HUD-approved housing counselor or an estate attorney about your situation.