When someone you love passes away, the last thing you need is a confusing letter about a reverse mortgage and a looming deadline. But if your parent (or another relative) had a HECM reverse mortgage, you will probably hear from the loan servicer pretty quickly.

I write about money for a living, and I still think reverse mortgages feel intimidating because the balance grows over time and the rules kick in fast after a death. The good news is this: with a HECM (Home Equity Conversion Mortgage), heirs generally have clear options and a key protection that can limit what you have to repay.

A stack of mortgage paperwork and envelopes on a kitchen table next to a calculator and a pen

Below is exactly what happens when a HECM borrower dies, what heirs may owe, how long you usually have to act, and what to gather first so you are not scrambling.

When a HECM is due

A HECM reverse mortgage typically becomes due and payable when the last surviving borrower:

  • Dies
  • Sells the home
  • Moves out permanently (meaning it is no longer the borrower’s principal residence)
  • Defaults on key requirements, most often property charges like taxes, homeowners insurance, or required HOA dues

There can also be issues tied to occupancy certifications and the condition of the home. In practice, “maintenance” problems usually become a default issue when the property is not being kept in safe, habitable condition or the damage materially affects value, and the servicer has given notice and time to correct it.

This article focuses on the most common trigger families face: the borrower’s death.

Important: “Due and payable” does not mean the lender is taking the house tomorrow. It means the servicer can now require the loan to be resolved, usually through a sale or payoff.

What heirs may owe

With a HECM, the amount owed is generally the current loan balance, which may include:

  • The money the borrower received (lump sum, monthly payments, or line of credit draws)
  • Accrued interest
  • Mortgage insurance premiums
  • Financed closing costs and certain fees (and for some older HECMs, a monthly servicing fee)

Because interest accrues over time, the balance can be a lot higher than the original amount your loved one borrowed. That is normal for reverse mortgages.

Also note: interest keeps accruing until the loan is paid off. That is why you should request an updated payoff statement when you are close to selling or refinancing.

The 95% rule

Most heirs worry about being personally stuck with a bill if the reverse mortgage balance is larger than what the home is worth. With an FHA-insured HECM, there is a major built-in protection called the non-recourse feature.

In plain English: the home is typically the source of repayment, and heirs are not usually required to pay more than the home’s value to satisfy the debt. This protection is specific to HECMs (the FHA-insured reverse mortgage program). Proprietary reverse mortgages can work differently.

When heirs want to keep the home, HUD rules generally allow them, through the servicer’s due-and-payable process, to satisfy the debt by paying the lesser of:

  • The full loan balance, or
  • 95% of the home’s current appraised value

This is often called the “95% rule.” The appraisal is typically ordered or accepted by the servicer as part of the HUD process, so you cannot always substitute your own estimate.

Quick example: If the loan payoff is $320,000 and the home appraises for $250,000, the payoff option to keep the home may be 95% of $250,000, which is $237,500 (plus any required closing-related amounts your servicer confirms). If the home appraises higher than the balance, then the balance is the number that matters.

Two practical takeaways:

  • If the home is worth more than the loan balance, the estate/heirs typically pay the balance (often through a sale) and keep the remaining equity.
  • If the home is worth less than the loan balance, heirs can often resolve it for 95% of appraised value if they want to keep it, or sell and let the sale proceeds go to the lender.

This is why getting a clear picture of the home value and the payoff amount early is so important.

Your main options

Once the borrower dies and the loan is due, heirs usually choose one of these paths.

Option 1: Sell the home

This is the most common option. The home is sold, and the sale proceeds are used to pay off the reverse mortgage. If there is money left over after the loan is paid, that remaining equity goes to the estate or heirs (depending on probate and title).

If the home sells for less than the amount owed on a HECM, the non-recourse feature generally protects heirs from owing the difference.

A for-sale sign in the front yard of a home, with paperwork and a pen visible on a nearby porch table

Option 2: Keep the home and pay it off

To keep the property, the reverse mortgage must be paid off. Heirs do this by paying:

  • The full payoff balance, or
  • 95% of the appraised value if that is lower than the balance (for FHA-insured HECMs)

Payoff funds can come from savings, inheritance funds, or other family resources.

Option 3: Refinance into a new mortgage

If heirs want to keep the home but do not have cash to pay it off, they can often refinance by getting a traditional mortgage in their own name (assuming they qualify). The new mortgage pays off the reverse mortgage, and the heir becomes the homeowner with a regular monthly payment schedule.

In real life, this option comes down to:

  • Credit and income qualification
  • How quickly the refinance can close
  • Whether the home will appraise high enough to support the new loan

How long heirs have

After the borrower dies, the servicer will send a due and payable notice and request information. The exact deadlines can vary by servicer and by your situation, so the notice and the servicer’s instructions are the source of truth.

That said, a common pattern families run into looks like this:

  • About 30 days to acknowledge the notice and show you are the authorized party (or working on it)
  • Up to 6 months to actively market and sell the home or line up financing
  • Extensions may be possible when you are making good-faith progress, sometimes allowing up to about 12 months total in many cases

Expect time pressure. Even when extensions are available, you usually have to request them and document progress. Do not assume extra time is automatic.

To protect yourself, ask the servicer early:

  • What is the current payoff amount and how long is it valid?
  • What is the deadline to show progress?
  • What documentation do you need from me as an heir or estate representative?
  • How do I request an extension if we are selling or refinancing?

If you are dealing with probate delays, contractor repairs, or an out-of-state property, communicate those facts in writing. Paper trails matter with tight timelines.

What to gather first

If you are an heir but not on the reverse mortgage, the servicer is going to need proof that you have the authority to discuss the loan and make decisions. Start a simple folder and gather:

  • Death certificate (order multiple certified copies if possible)
  • Proof of your identity (government-issued ID)
  • Proof of your authority to act for the estate, if applicable (letters testamentary, letters of administration, or small-estate paperwork depending on your state)
  • The reverse mortgage account information (servicer name, account number, and whatever borrower verification the servicer requests)
  • Property documents (deed, current homeowners insurance declarations page, property tax bill)
  • Any will or trust documents that clarify who inherits the property
  • HOA information (if relevant) and contact details for dues and resale requirements
A death certificate and estate paperwork laid out neatly on a desk beside a labeled folder and a black ink pen

My practical tip: Call the servicer and ask what their “successor in interest” process looks like. Some servicers have a specific packet or checklist they want you to complete before they will speak freely with you.

Also, be careful with sensitive info. If a servicer requests a Social Security number or other private data, ask how to submit it securely. Do not email sensitive documents unless the servicer provides a secure upload or other protected method.

How value is set

Because the 95% rule and many payoff decisions depend on value, the property typically needs a current appraisal. In many situations, the servicer orders an FHA appraisal (or uses a HUD-compliant valuation process) as part of the due and payable process.

If the home needs major work, the appraised value might be lower than what you remember, especially if the property has deferred maintenance. That is frustrating, but it is also why you want to review the appraisal carefully and ask about your options if you believe it is inaccurate.

Surviving spouse not on the loan

This is where things can get sensitive. Some families assume the loan becomes due immediately even if a spouse is still living in the home.

HECMs have specific protections that may allow an eligible non-borrowing spouse to remain in the home under certain conditions. That topic deserves its own space, so I cover it in our overview: HECM Reverse Mortgages Explained.

Costs to watch while you decide

Even if the reverse mortgage is non-recourse, the house still has real-world carrying costs. If the property will be vacant for a while, plan for:

  • Property taxes, insurance, and HOA dues (these are the big ones)
  • Utilities needed for showings, inspections, or to prevent damage
  • Lawn care, snow removal, and basic upkeep to avoid code issues
  • Winterization in cold climates to prevent frozen pipes

One subtle problem: vacancy can affect insurance coverage. If the home will be empty, call the insurer and ask what they require so you do not learn the hard way that a claim is denied.

Mistakes I see

Waiting too long to contact the servicer

Even if you do not have all the paperwork yet, making the initial call and asking for the successor process can buy you clarity and time.

Assuming you must use your own money

Many heirs are relieved to learn that a HECM is non-recourse. The home is typically the main source of repayment. Your personal bank account is usually not automatically on the hook.

Letting taxes and insurance lapse

If the home sits vacant during probate, bills can get missed. Property taxes and homeowners insurance are a big deal with reverse mortgages. If you plan to sell, keep the property protected and insured while it is in transition.

Not pricing the home realistically

If you are selling, overpricing can burn time you do not have. A stale listing can lead to missed deadlines. A good local agent who understands estate sales can be worth their commission.

Quick FAQ

Do heirs inherit the reverse mortgage debt?

Heirs do not typically inherit a personal obligation to pay a HECM balance out of their own pocket. The loan is generally repaid from the home’s value through sale or payoff. Specific estate rules vary by state, so if you are unsure, ask an estate attorney.

Can the lender take the house right after the borrower dies?

Not usually right away, but the loan does become due and payable. If heirs do not communicate or make progress toward selling or paying off the loan, foreclosure can become a risk. The key is staying in contact, meeting deadlines, and requesting extensions early when you need them.

What if we do not want the house?

If nobody wants to keep the property, the usual outcome is to sell it. In some situations, heirs may also choose to disclaim an inheritance under state law, which is a legal step with strict timing rules. Either way, with a HECM the lender’s remedy is generally against the home, not against heirs personally. If you are considering disclaiming, talk to an estate attorney first because it can affect taxes, benefits, and who ends up with the property.

What if there are multiple heirs and we disagree?

This is common. If the home is going through probate, the personal representative or executor may have legal authority to make decisions. If it is in a trust, the trustee may. When family conflict is high, an estate attorney can help prevent expensive delays.

What if the home is worth more than the reverse mortgage balance?

Then there is equity. Selling the home often pays off the reverse mortgage and leaves remaining funds for the estate or heirs.

My next steps

If you are the heir handling this, here is a straightforward order of operations:

  1. Find the servicer and call to report the death.
  2. Ask for the successor in interest requirements and the exact deadlines in your case.
  3. Order death certificates and gather authority documents (executor paperwork or trust documents).
  4. Request the payoff statement and ask how long it is valid.
  5. Get a realistic sense of home value (agent opinion, then the formal appraisal process).
  6. Choose your path: sell, refinance, or pay off.
  7. Document everything and request extensions early if you need them.

If you want, tell me your situation, like whether the home is in probate, whether there is a surviving spouse in the home, and whether the house needs repairs, and I can help you think through which option is most realistic.