What Happens When a HomeSafe Reverse Mortgage Comes Due?

Many homeowners worry about what happens to a reverse mortgage after they pass away. Here's what families should expect, the options available, and why the process is usually much less stressful than most people imagine.

One of the first questions people ask me when they're considering a reverse mortgage is:

"What happens when I pass away?"

It's an important question, and fortunately, the answer is usually much simpler than people expect.

Like every mortgage, a reverse mortgage eventually has to be paid off. That doesn't mean your family loses the home, and it doesn't mean your heirs are left scrambling without options.

Let's walk through what typically happens.

First, What Causes a Reverse Mortgage to Become Due?

For most homeowners, the loan doesn't become due until the last borrower permanently leaves the home. That usually happens because:

• The home is sold.

• The last borrower passes away.

• The home is no longer the borrower's primary residence for an extended period.

• Property taxes, homeowners insurance, or other required property charges are not paid.

• The home is allowed to fall into serious disrepair.

For the vast majority of my clients, the loan simply comes due after they have passed away.

What Should the Family Do First?

The first step is simply to contact the loan servicer.

Many families think they have to make immediate decisions, but they don't. They get an automatic 6 months as long as they reach out to the servicer. Frequently they can get extensions for another 6 months.

The loan servicer's job is to guide the family through the process, explain the available options, and answer questions.

One mistake I encourage families to avoid is ignoring letters from the servicer. The lender does not want the house. They will always work with the family on a solution.

Communication is important, and the earlier everyone talks, the smoother the process usually becomes.

Does the Family Have to Sell the House?

Not necessarily. Generally speaking, families have several options. They can:

• Sell the home and use the proceeds to pay off the reverse mortgage.

• Refinance the property into a traditional mortgage if they want to keep it.

• Pay off the loan using other available funds.

• In some situations, choose to let the lender take ownership of the property instead.

Every family's situation is different, but there are usually choices.

Is Everything Due Immediately?

No. Time is provided to the family to work things out. The important thing is maintaining communication throughout the process.

What If the Family Doesn't Want the House?

That happens more often than people think. Sometimes children and grandchildren live across the country. Sometimes maintaining or selling the property simply isn't practical.

In those situations, there are options available to help resolve the loan without requiring family members to become long-term property managers.

Again, I will explain those options based on your family's circumstances.

A Reverse Mortgage Is Still a Mortgage

One thing I always explain to my clients is that a reverse mortgage works much like any other mortgage. The rules just make it due and payable upon certain triggers, most commonly, that all borrowers no longer live in the house.

As long as you're living in the home as your primary residence, paying your property taxes and homeowners insurance, maintaining the property, and meeting the loan requirements, you can continue living there without a required monthly mortgage payment.

When the last borrower permanently leaves the home, the loan is repaid from the sale of the property, refinancing, or other available funds.

The Conversation Is Easier Than Most Families Expect

I've had many conversations with clients and their adult children over the years.

Almost every family begins with some level of anxiety. By the end of the conversation, most realize the process is much more straightforward than they expected.

The key is understanding the options before they're needed.

If you already have a reverse mortgage, or you're thinking about one, I encourage you to discuss your plans with your family. Knowing what to expect can eliminate a lot of unnecessary worry and make an already difficult time just a little easier.

This article is intended for general educational purposes. Specific timelines, servicing procedures, and repayment options may vary depending on the loan program and individual circumstances. All loans are subject to approval. Equal Housing Lender.