The loan comes due, but nobody inherits the debt. Here is the timeline, the three choices heirs have, and what they actually end up with, worked out from HUD’s own numbers.
When the last borrower dies, the reverse mortgage becomes due and payable. Nobody inherits the debt itself: it is non-recourse, so the most anyone can ever owe is what the house is worth. The heirs (or the estate) have three real choices: sell the house and keep whatever is left after the loan is repaid, keep the house by paying the loan off (for no more than 95% of its appraised value), or walk away by signing the house over to the lender. Doing nothing is the one choice that leads to foreclosure.
Check this first, because it changes everything. If a surviving spouse is a co-borrower on the loan, nothing comes due: the loan simply carries on for them. If the spouse was not on the loan but was married to the borrower at closing (and stayed married), and is named in the loan documents as an eligible non-borrowing spouse, repayment is put off for as long as they keep living there and keep up the taxes, insurance and upkeep. They can’t draw any more money from the loan. These spouse protections apply to HECMs with FHA case numbers assigned on or after August 4, 2014; for older loans, ask the servicer about HUD’s Mortgagee Optional Election. If neither applies, the steps below start.
That makes roughly 12 months at most from the due date. Interest and mortgage insurance keep adding to the balance the whole time, so a quick sale leaves more for the heirs.
A borrower who was 72, with a $400,000 paid-off house, used the full first-year limit: about $83,300 (60% of a $138,800 principal limit, from HUD’s table), including roughly $17,000 of financed upfront costs. They never drew anything else and the loan just grew. Here is what the heirs face, depending on when the borrower dies and what the house did in the meantime. “Heirs net” assumes they sell and pay about 6% in selling costs.
| Loan balance | Home value (+3%/yr) | Heirs net after a sale | Home value (flat) | Heirs net after a sale | Cost to keep the flat-value home | |
|---|---|---|---|---|---|---|
| Dies after 10 years | $171,600 | $537,600 | $333,700 | $400,000 | $204,400 | $171,600 |
| Dies after 15 years | $246,400 | $623,200 | $339,400 | $400,000 | $129,600 | $246,400 |
| Dies after 20 years | $353,800 | $722,400 | $325,300 | $400,000 | $22,200 | $353,800 |
| Dies after 25 years | $507,900 | $837,500 | $279,400 | $400,000 | $0 | $380,000 |
Assumptions: principal limit from HUD’s official table at a 7.68% expected rate; balance and unused credit line grow 7.5% a year (7.0% interest + 0.5% annual mortgage insurance); upfront costs = 2% FHA mortgage insurance + the HUD-capped origination fee + about $3,000 of other closing costs. Illustrations, not quotes. Your lender’s rate and a HUD counselor give exact figures.
Two things jump out. In a normal housing market, the heirs still inherit a lot: the loan eats the equity slowly. But if the house doesn’t gain value, the balance passes its value after about 22 years, and from then on the heirs inherit nothing from a sale. That is exactly when the non-recourse rule protects them: the FHA insurance covers the gap, and nobody owes the shortfall.
This is what most heirs do. The loan is paid from the sale and everything left over goes to the estate. If the house is worth less than the balance, it can still be sold to an outside buyer for at least 95% of its appraised value and the sale settles the loan in full; the FHA insurance absorbs the rest.
An heir who wants the house can pay off the loan, usually with their own mortgage. They pay the smaller of the full balance or 95% of the home’s current appraised value. In the flat-value example above, after 25 years the balance has passed the home’s value, so an heir could keep the house for 95% of its appraised value rather than the full balance. The last column shows that figure.
If the house is worth less than the loan and nobody wants it, the estate can sign it over with a deed in lieu of foreclosure, recorded within 9 months of the due date. It ends the matter without a foreclosure. Nobody owes the difference. Servicers are allowed (not required) to pay a “cash for keys” incentive when the house is handed over empty and clean: under HUD’s rules up to $7,500 plus up to $5,000 of probate costs if it happens within a year of the due date, and less after that. Ask whether yours offers it.
Then the servicer forecloses once the deadlines pass. Even then the heirs don’t owe the shortfall, but the estate typically keeps far less: foreclosure costs and the delay are added to the balance, and a forced sale usually brings less than a normal one. If there is equity, silence is the most expensive option.
Not personally. A HECM is non-recourse: the debt is repaid from the house, and no heir or estate ever owes more than the home is worth. Heirs who want to keep the house pay the smaller of the balance or 95% of its appraised value.
30 days from the due-and-payable notice to tell the servicer their plan. The servicer must start foreclosure about 6 months after the due date unless HUD approves an extension; heirs who are actively selling or refinancing can get up to two 90-day extensions. Roughly 12 months at most.
If the spouse is a co-borrower, the loan continues. If the spouse is an eligible non-borrowing spouse named in the loan documents, repayment is deferred while they live in the home and keep up taxes and insurance. Otherwise the loan comes due.
Yes. If the heirs don’t sell, pay off, or sign the house over within the deadlines, the servicer forecloses. Even then nobody owes the shortfall, but foreclosure costs and a forced sale usually leave the estate far less than a normal sale would.
Educational, not individual financial advice. The Equity Ledger doesn’t originate loans. Reverse mortgages are complex and the right answer depends on your specific situation — confirm the details with a HUD-approved counselor before you decide.
Rules and figures are from U.S. government program materials current at publication; HECM limits and rates change — verify with HUD/FHA or a HUD-approved counselor.