If you are reading this, I am probably no longer here to explain a decision I made about my home.
I took out a reverse mortgage. I did not do it because I wanted to leave you a problem.
I did it because the equity in my home was part of what I had accumulated during my lifetime, and I chose to use some of it while I was alive. I wanted to stay in my home, on my terms, for as long as I could.
Maybe it helped me remain in my home. Maybe it supplemented my retirement income. Maybe it paid bills, helped with medical expenses, or simply gave me greater financial independence.
Whatever my reason, please don’t start with guilt, anger, or fear.
Begin by finding out exactly what I left behind.
Look through my papers.
Find the reverse mortgage statements, the loan servicer’s name, the loan number, and any recent correspondence.
Then find out:
How much is owed?
Who is named as a borrower?
Is there a co-borrower or an eligible non-borrowing spouse?
What is the house worth today?
How much equity may still remain?
Who currently has legal authority to act?
Has the servicer sent a notice?
Is there a deadline approaching?
Please don’t assume the bank owns the house.
With a reverse mortgage, I remained the owner of my home. The home was security for the loan, much like it is with another mortgage.
But don’t assume you can ignore the loan either.
After my death, time matters.
This may be the most important thing I can tell you.
Don’t leave the lender’s letters sitting on the kitchen counter because probate hasn’t been completed.
Don’t assume my attorney, trustee, real estate agent, or somebody else is automatically handling it.
Find out who is communicating with the loan servicer.
For the common federally insured reverse mortgage, the Home Equity Conversion Mortgage, or HECM, the loan generally becomes due and payable after the last borrower dies, subject to special rules that may protect an eligible non-borrowing spouse. The estate or heirs then have options for satisfying the debt, but those options come with procedures and timelines.
Probate may move on one clock. The reverse-mortgage servicer may be moving on another.
Someone needs to watch both.
Please don’t hear “reverse mortgage” and immediately assume the house is lost.
Depending on the loan, the property value, who survives me, and what you want to do with the house, there may be several paths.
You may decide to sell the property and satisfy the reverse mortgage from the proceeds.
You may want to keep the home and arrange to satisfy the loan through other funds or financing.
If this is a HECM, federal rules provide important protections. If the loan balance is greater than the home’s value, the estate or heirs may generally satisfy the loan for the lesser of the full debt or 95% of the current appraised value, subject to the applicable HUD requirements.
Or you may look at the numbers and decide there is little or no equity worth pursuing.
That is a decision too.
Don’t make the decision until you know the loan balance, the property’s value, your authority, and your deadlines.
Understand this before you calculate your inheritance.
A reverse mortgage works differently from a traditional mortgage.
Interest and fees are generally added to the balance over time. That means the amount owed can increase while the remaining equity decreases.
So don’t start with:
“The house is worth $900,000.”
Start with:
“What is the house worth, what is owed against it, and what would remain after the costs of dealing with it?”
Those are very different questions.
There may be substantial equity.
There may be modest equity.
There may be very little.
Find the numbers before you fight over the house—or spend money trying to save something that isn’t there.
Maybe this house means something to you.
Maybe you grew up here. Maybe you want to live here. Maybe one of you wants to buy out the others.
That’s fine.
But sentiment doesn’t pay off a reverse mortgage.
Find out what is required to satisfy the loan and whether you can realistically arrange the necessary financing or funds.
For HECMs, heirs seeking to retain the property may generally satisfy the loan for the lesser of the full debt or 95% of the current appraised value, subject to applicable HUD requirements.
Run the numbers before promising each other anything.
Keeping the house should be a financial decision as well as an emotional one.
Then organize quickly.
Determine who has authority to sign.
Contact the servicer.
Obtain the current payoff information.
Understand the property’s likely market value.
Find out whether probate, a trust, title, occupancy, property condition, or another issue could affect the timing.
And don’t wait until you have a buyer before discovering that the person negotiating the sale does not yet have the authority needed to complete it.
I left you a house with a loan attached to it.
Your job is to understand both sides of that equation.
For the step-by-step issues that arise after the borrower dies, continue with Reverse Mortgage After Death in Probate or Trust.
Please don’t throw good money after bad simply because the property was mine.
A HECM is generally non-recourse. The applicable protections are designed so that the borrower, estate, or heirs are not personally responsible for an underwater balance beyond the rules governing satisfaction of the loan and property value.
That doesn’t mean you should walk away without understanding the consequences.
It means you should get the payoff, determine the property’s value, understand the HECM rules that apply, and then make the decision with actual numbers.
Sometimes preserving an inheritance means preserving the house. Sometimes it means knowing when not to put more family money into it.
My death does not automatically give you authority to sign contracts, list the property, refinance it, or speak for my estate simply because you are my child or beneficiary.
Find out who has legal authority.
At the same time, don’t let uncertainty about probate become an excuse for ignoring correspondence from the reverse-mortgage servicer.
If probate authority is still being established, tell the probate attorney about the reverse mortgage immediately and make sure somebody is communicating with the servicer.
Court authority and lender deadlines need to be coordinated—not discovered one after the other.
Don’t assume the word “trust” solves everything either.
Confirm that the property was actually titled in the trust and determine who is now authorized to act as successor trustee.
If the trust exists but the house was never properly transferred into it, additional legal work may be necessary.
Again, don’t wait for that issue to resolve itself while ignoring the reverse mortgage.
Find the title. Find the trust. Find the servicer. Then determine who can act.
A reverse mortgage doesn’t eliminate the ordinary costs and responsibilities of owning property.
Property taxes, homeowners insurance, and maintenance obligations matter, and failure to meet required property obligations can create problems under a HECM.
After I am gone, don’t let the house deteriorate while everyone debates what to do with it.
Check for leaks.
Secure it.
Deal with insurance.
Watch the mail.
Keep records of money spent.
And know what it is costing the estate each month.
A house can lose value while a family is still deciding how valuable it is.
Please don’t judge my reverse mortgage only by what is left when I die.
Part of the value may have been what it allowed me to do while I was alive.
It may have helped me stay independent.
It may have allowed me to remain in my home.
It may have given me access to money I had spent decades building into the property.
You may ultimately decide that I made a good decision.
You may decide you would have done something differently.
That’s okay.
It was my financial decision during my lifetime. What happens next is yours to manage carefully.
So find the documents.
Open the lender’s letters.
Find out what the house is worth.
Find out what is owed.
Find out who has authority.
Watch the deadlines.
Then decide whether to keep the house, sell it, or let it go.
Don’t inherit my fear. Inherit the facts—and make your decision from there.
If you are holding a reverse mortgage statement and don’t know what it means for the property, start there.
Bring me the property address, the most recent statement, what you know about the title, and any notices you have received.
I am a Real Estate Broker and Mortgage Loan Originator. I can help you look at the property, debt, equity, financing, and sale side of the picture. Legal and tax questions should be handled with the appropriate attorney or tax professional.
You don’t need to know which direction you are going before we talk.
Don’t make your decision because this was my home. Understand what I left you, run the numbers, and decide what makes sense for you.
A reverse mortgage can affect more than one heir. Understanding the issue is important. So is understanding each other’s interests and expectations. Share this letter with the family before decisions are made.
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A Legacy Deserves Thoughtful Decisions
A property can represent years of work, memories, and financial value. Before deciding what comes next, take the time to understand what you have and the options available
Good decisions begin with understanding your options.
Serving Orange County, California, with structured probate and estate real estate representation.
Serving Orange County, California, with structured probate and estate real estate representation. Real estate services only. Legal and tax advice should be obtained from licensed professionals.