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Can you keep your parents’ home if they have a reverse mortgage?

older couple on front porch

If your parents have a reverse mortgage, you may be wondering whether or not you’ll be able to keep the home once they are no longer living in the property. This is a pretty common question and concern among the reverse mortgage heirs. There are essentially three options when it comes to handling a reverse mortgage once your parents no longer live in their home.

Option 1: Sell the Home

If your goal is to keep the home, obviously this option wouldn’t make much sense. However, if you’re concerned about who is going to be responsible for the home once your parents no longer live in it (and who will be responsible for the reverse mortgage), not to worry. You as their heir are under no obligation to repay the reverse mortgage debt. You can sell the home and use the proceeds to pay off the reverse mortgage. If there is any money leftover from the sale of the home after the reverse mortgage has been repaid, the heirs can keep it.

Keep in mind, if you do not repay the mortgage debt, you will not be able to keep the home. So, while you are not financially obligated to repay the reverse mortgage, you or your parents’ estate will need to satisfy the loan debt before you can keep the home for yourself.

Option Two: Keep the Home

If you decide you want to keep the home, even if it means paying off your parents’ reverse mortgage, you may be able to do so more affordably than you think. If you decide to keep the home, you’ll need to refinance 95% of the home’s value or the balance of the loan, whichever is lower. Why 95%? Reverse mortgages are considered non-recourse loans, meaning that the maximum amount owed is 95% of the current market value of the home.

Non-recourse loans also mean that if the home is sold and the balance of the loan is more than the home’s sale price, the Department of Housing and Urban Development (HUD) does not hold the heirs responsible for the difference. Instead, the difference is forgiven and the loss is absorbed by HUD or the Federal Housing Administration (FHA).

Option Three: Forfeit Responsibility for the Home

The great thing about reverse mortgages is that the heirs don’t have to deal with the mortgage if they choose not to. If you don’t want to handle any part of the reverse mortgage of your parents’ home once they’re no longer living in it, you will not be held responsible for payment of any kind related to that loan.

Where to Learn More

Contact our team of Reverse Mortgage professionals today by calling (800) 596-3788 or by filling out the form on this page and letting one of our team members reach out to you.