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Reverse Mortgages, Heirs and Spouses: What Happens When the Loan Comes Due

What happens when the last borrower dies or moves out, heirs' options, the 95% rule and protections for spouses.

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Talk to Maggie directly: cell (916) 549-3131 (text or call) · maggie@loveyoursurroundings.coMaggie B. Hopkins, NMLS #349517 · Surroundings NMLS #2528307

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When does a reverse mortgage have to be repaid?

This page is general information, not legal, tax or financial advice for your situation. Rules can change, so every fact below names its source and date.

Federal rules (24 CFR 206.27(c), checked October 22, 2026) say the loan becomes due and payable when:

a borrower dies and the home is not the principal residence of at least one surviving borrower (unless an eligible non-borrowing spouse qualifies for a deferral, explained below),
the borrower sells or signs over all title and no other borrower keeps title,
the home stops being the principal residence of any borrower for reasons other than death,
a borrower is away for more than 12 months in a row because of physical or mental illness and no other borrower lives there,
property taxes or insurance aren't paid, or
another loan obligation isn't met.

The last three can happen while you're alive and living there. Our obligations page covers how to stay in good standing.

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What happens after the last borrower dies?

The servicer learns of the death, gets HUD's approval where needed, and sends a due-and-payable notice. Under 24 CFR 206.125(a)(2), the notice goes to the estate and heirs (and any eligible non-borrowing spouse). It gives them 30 days to choose a path.

The CFPB page on heirs (last reviewed August 28, 2026) says that 30-day timeline may be extended up to six months to allow a sale or to arrange financing. Extensions are not automatic. Stay in touch with the servicer in writing and keep copies.

The CFPB suggests heirs talk with a HUD-approved housing counselor or an attorney. If the home is in a trust or going through probate, our probate and trust sales page explains how a sale works in California. Maggie's article What Happens to a Reverse Mortgage When a Parent Dies in Sacramento? walks through the first weeks.

What are the heirs' options?

Under 24 CFR 206.125 and the CFPB's heirs page (last reviewed August 28, 2026), heirs can:

Keep the home by paying off the loan. If the balance is more than the home is worth, see the 95% rule below.
Sell the home, repay the loan, and keep any money left over.
Sell for at least 95% of the appraised value when the balance is more than the home is worth. The FHA insurance covers the rest.
Sign a deed in lieu of foreclosure, giving the home to the lender to satisfy the debt.

If the family does nothing, the lender can foreclose. Choosing a path early, even if it's simply "we're selling," keeps more options open.

How does the 95% rule work?

This rule protects families when the loan balance has grown past the home's value. The CFPB's heirs page (last reviewed August 28, 2026) says heirs can pay off the loan by selling the home for at least 95% of its appraised value. The mortgage insurance the borrower paid covers the shortfall.

24 CFR 206.125 uses the same 95% figure for a sale once the loan is due, and the appraisal is ordered at the lender's expense when the loan is due and payable. If your family wants to keep a home that is worth less than the balance, ask the servicer in writing what payoff HUD's rules allow before you count on a number.

In words: if Mom's home appraises for less than what's owed, the family generally doesn't make up the difference. If the home is worth more than what's owed, the family keeps the extra equity.

Can your children inherit the loan debt?

No, not beyond the home. A HECM is non-recourse. Under 24 CFR 206.27(b)(8), the borrower has no personal liability for the balance. The lender can collect only through sale of the property and can't get a deficiency judgment. The CFPB (page last reviewed July 11, 2022) explains that if the balance is more than the home is worth, you or your heirs may not have to pay the difference.

What heirs inherit is the decision. They may need to act quickly to sell or pay off the loan. Talking with them now, while you can, makes that much easier.

What happens to a spouse who isn't on the loan?

It depends on whether that spouse is an eligible non-borrowing spouse. Under 24 CFR 206.55(c) (checked October 22, 2026), the spouse must:

have been married to the borrower at closing and stayed married for the borrower's lifetime,
be disclosed to the lender and named as an eligible non-borrowing spouse in the loan documents, and
have lived in the home as a principal residence, and keep living there.

If those are met, the loan's due-and-payable status is deferred after the borrower dies. The spouse can stay in the home while they keep meeting the rules. Under 24 CFR 206.55(d), within 90 days of the borrower's death the spouse must establish legal ownership or another legal right to remain in the home for life. They must also keep paying taxes, insurance and upkeep.

One important limit. Under 24 CFR 206.27(b)(1), no more money is paid out during the deferral period. The spouse can stay, but the payments or line of credit stop.

What if a spouse is ineligible?

A spouse who doesn't meet the rules at closing is an ineligible non-borrowing spouse. 24 CFR 206.55(c)(2) says a spouse who is ineligible at closing can't become eligible later. When the borrower dies, the loan comes due as usual.

Common examples: a couple marries after the loan closes, or a spouse doesn't live in the home as a principal residence. Non-borrowing spouses still take part in HECM counseling where it applies, under HUD's counseling certificate.

This is why the planning happens before closing, not after.

Should both spouses be borrowers?

When both spouses are at least 62, making both of them borrowers is usually the cleanest setup. If one passes away or moves into care, the other is still a borrower. The CFPB's page on borrower responsibilities (last reviewed August 9, 2024) says a remaining co-borrower may stay and keep receiving loan payments, as long as they meet the loan requirements.

If one spouse is under 62, they can't be a borrower under 24 CFR 206.33, because the youngest borrower must be 62 at closing. They may qualify as an eligible non-borrowing spouse instead. The trade-off is that the principal limit is based on the younger spouse's age, so it's generally lower. The protection is that the younger spouse can stay.

Bring these questions to counseling, and consider an estate planning attorney too. The CFPB also encourages borrowers to talk with their children about repayment.

What should families do now, before anything happens?

Keep a copy of the loan documents and the servicer's contact information where the family can find them.
Make sure the right people are named in the will or trust, and that someone can speak for you if you can't.
Use the annual occupancy certification to name an alternate contact. 24 CFR 206.211 allows the borrower to designate one.
Talk with your heirs about whether they would want to keep or sell the home.
Get a sense of the home's value. A home value review is a good start.

If the plan is to sell someday, our Well MOVED program helps families handle the house, the belongings and the sale on one timeline.

How do you start planning for heirs and spouses?

Call Maggie's cell at (916) 549-3131 or fill out the loan options form and choose "A reverse mortgage." If you're an heir dealing with a loan that has already come due, call us too. Maggie is also a real estate broker and can help with the sale and the timeline with the servicer.

You're always free to use any lender or agent you like.

Frequently Asked Questions

How long do heirs have after a reverse mortgage comes due?

The due-and-payable notice gives 30 days to choose a path. The CFPB says the timeline may be extended up to six months to allow a sale or arrange financing. Extensions are not automatic.

What is the 95% rule for reverse mortgages?

If the loan balance is more than the home is worth, heirs can satisfy the loan by selling the home for at least 95% of its appraised value. The FHA mortgage insurance covers the shortfall (CFPB, last reviewed August 28, 2026).

Will my kids have to pay if the loan is more than the house is worth?

No. A HECM is non-recourse. The lender can collect only through the sale of the home, not from you or your heirs personally.

Can my spouse stay in the home if they're not on the loan?

If they qualify as an eligible non-borrowing spouse under 24 CFR 206.55, the loan is deferred and they can stay while meeting the rules. No more money is paid out during the deferral.

What if we got married after the reverse mortgage closed?

A spouse must have been married to the borrower at closing to be an eligible non-borrowing spouse. A spouse who was ineligible at closing can't become eligible later.

Can heirs keep the house?

Yes, by paying off the loan, often with their own financing or cash. If the balance is higher than the home's value, ask the servicer in writing what payoff HUD's rules allow.

Who should heirs talk to?

The servicer first, in writing. The CFPB suggests a HUD-approved housing counselor or an attorney. If a sale makes sense, a real estate broker who knows estate sales can help with timing.