Reverse mortgages help a lot of older homeowners stay in their homes. But when it's time to sell, or when a parent with a reverse mortgage passes away, families often aren't sure what they owe or how fast they have to act.

Here's how it works in plain English. Most reverse mortgages are HECMs (Home Equity Conversion Mortgages), which are insured by the federal government through the FHA (Federal Housing Administration). That's what this guide covers. Private reverse mortgages can have different terms, so check your loan documents.

The basics

With a regular mortgage, you pay the bank every month and the balance goes down. With a reverse mortgage, the bank pays you, or you draw money as needed, and the balance goes up over time, with interest and fees added on.

The loan usually comes due when the last borrower:

• Sells the house
• Moves out permanently (including moving into long-term care for more than a year)
• Passes away
• Stops paying property taxes or homeowners insurance, or lets the house fall apart

Selling while you're still living there

You can sell anytime. The reverse mortgage gets paid off at closing from the sale, just like a regular mortgage, and you keep whatever's left.

Get a payoff statement from your loan servicer early so you know exactly what you owe.

Selling an inherited house with a reverse mortgage

This is where families get nervous, so here's the part that matters most.

HECM reverse mortgages are "non-recourse." That means neither the estate nor the heirs ever have to pay more than the house is worth. If the loan balance has grown bigger than the home's value, the FHA insurance covers the difference.

What heirs can typically do:

• Sell the house and pay off the loan from the sale, keeping anything left over
• Keep the house by paying off the loan. Heirs can usually pay the lesser of the full balance or 95% of the home's current appraised value
• Walk away, by letting the lender take the house or signing a deed in lieu of foreclosure, with no bill to the family

Watch the deadlines

After the borrower passes away, the servicer will reach out to the estate. Heirs generally get about 30 days to tell the servicer what they plan to do, and about six months to sell or pay off the loan. Extensions are often possible if you're actively working on a sale. Respond in writing and keep copies.

Don't ignore the servicer's letters. Missing deadlines can lead to foreclosure, which takes the decision out of your hands. Read our inherited house and probate guide for the rest of the estate process.

Frequently asked questions

Can I sell my house if I have a reverse mortgage?

Yes. The loan gets paid off from the sale at closing, and you keep the remaining equity.

Will my kids owe money if the reverse mortgage is bigger than the house is worth?

Not on a HECM. Those loans are non-recourse, so the debt can't exceed the home's value, and heirs aren't personally on the hook.

Is there any equity left with a reverse mortgage?

Often yes, especially if the loan is newer or the home's value has gone up. A current market value tells you quickly. Try our instant home value estimate to start.

What if the house needs work before it sells?

You can sell it as-is. Compare listing it, a cash sale, and other paths on our Your Options page.

Let's look at your numbers

Call Winner Realty at (502) 305-8915 or book a time. See our senior real estate services page, and every hard-situation guide on our Selling in a Tough Spot page.