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With approximately 10,000 people turning 65 every day in the U.S., many are considering reverse mortgages to access home equity. When you die, the reverse mortgage loan balance becomes due. Your heirs can either repay the loan, sell the home, or walk away without owing anything, depending on the situation.
Key Insights
In 2023, there were 32,991 Home Equity Conversion Mortgage (HECM) endorsements, down from 114,692 in 2009, indicating fluctuating popularity.
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A 2018 survey showed HECM borrowers had higher financial satisfaction, 3 to 5 years after securing a reverse mortgage compared to those who didn’t proceed with the loan.
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Reverse mortgage complaints made up less than 1% of all mortgage-related complaints in 2021.
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Heirs have up to 6 months to refinance the reverse mortgage, or up to 12 months to sell the property, with two possible 3-month extensions.
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Only 48,329 HECMs were issued in 2018, making them less popular than HELOCs and cash-out refinances.
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How Common Are Reverse Mortgages Today?
Reverse mortgages, particularly Home Equity Conversion Mortgages (HECMs) insured by the Federal Housing Administration (FHA), have experienced fluctuations in popularity over the years. In fiscal year 2023, there were 32,991 HECM endorsements, a decrease from the peak of 114,692 in fiscal year 2009.
Despite this decline, reverse mortgages remain a viable option for many seniors seeking to access their home equity. In the first half of 2024, 19,894 older homeowners initiated an HECM, indicating ongoing interest.
However, while reverse mortgages are available, they are not as commonly utilized as other financial products. With approximately 10,000 individuals turning 65 each day in the U.S., the uptake of reverse mortgages is still well under one percent of the eligible population.
Reverse Mortgage Borrowers and Financial Satisfaction
A 2018 Journals of Gerontology survey of 1,088 adults over 65 found that HECM borrowers reported higher financial and housing satisfaction 3 to 5 years after securing a reverse mortgage compared to their non-borrower counterparts who received HECM counseling but chose not to proceed with the loan.
Reverse Mortgage Borrowers Have Fewer Complaints
In 2021, complaints to the Consumer Financial Protection Bureau (CFPB) regarding reverse mortgages accounted for less than 1% of the 32,000 mortgage-related complaints received that year.
Of the complaints against various mortgage loans, 65% were directed at traditional mortgages. The remaining complaints were against other home loan types such as VA loans, home equity, and lines of credit.
Reverse Mortgages vs Other Equity Options
While reverse mortgages have gained some popularity, they are still much less common compared to other ways of accessing home equity. A 2020 Urban Institute report, based on 2018 data, shows that only 48,329 FHA-backed Home Equity Conversion Mortgages (HECMs) were issued.
In comparison, homeowners took out over 1.12 million HELOC loans, nearly 1.1 million cash-out refinances, and 296,000 home equity loans with monthly repayments.
The Drawbacks of Reverse Mortgages
Reverse mortgages, particularly Home Equity Conversion Mortgages (HECMs), offer seniors a way to access their home equity without selling their property. Since the program’s inception in 1990, over 1.3 million older homeowners have utilized these loans.
In fiscal year 2023, the HECM program recorded 32,693 endorsements, roughly half of the total seen in 2022. Despite these fluctuations, reverse mortgages remain a popular choice for seniors seeking to tap into their home equity.
However, while reverse mortgages can be a useful financial tool, it’s important to be aware of their potential drawbacks:
Higher Closing Costs
HECMs tend to have higher closing costs compared to traditional loans, including an initial mortgage insurance premium (MIP) of 2% of the home’s appraised value or maximum claim amount, along with other fees like origination and third-party charges.
Primary Residence Requirement
To qualify for a reverse mortgage, the property must be your primary residence. If you move out without selling, the reverse mortgage becomes due. Heirs can’t assume the loan, and it must be settled through selling the home or refinancing.
Non-Assumable Loan
Upon the death of the last surviving borrower, the reverse mortgage balance becomes due. Heirs must repay the loan by selling the property or using other funds, which can limit their options and affect their inheritance plans.
Decreasing Home Equity
Since borrowers don’t make monthly payments, the loan balance grows over time due to interest and fees. This can significantly reduce the home’s equity, leaving less inheritance for heirs.
What Happens to a Reverse Mortgage After Death?
Many people believe that when the last borrower passes away, the home automatically goes to the bank. However, that’s not the case. After the death of the last borrower, the reverse mortgage loan balance becomes due. At this point, your heirs have a few options:
Repay the loan
If they want to keep the home, they can pay off the loan balance. This can be done by refinancing with new financing or using other available funds. The repayment amount is the lower of the loan balance or 95% of the home’s current market value.
Sell the home
Your heirs can choose to sell the house and keep any equity from the sale. However, they must take the necessary steps to transfer the title (such as going through probate or trust certification). It’s a good idea to consult an estate attorney to make sure they follow the right steps.
Walk away
If your heirs decide not to keep the home, they can walk away, and the lender will handle the sale of the property.
If your heirs decide to refinance, the lender typically gives them up to 6 months to complete the loan. If they opt to sell the property, they are given up to 12 months, with the possibility of two 3-month extensions.
During this time, communication is key. The lender or its servicer will expect regular updates and proof of efforts to sell the property may be required.
The lender does not want to foreclose or sell the property independently. However, if your family member is not attempting to repay the loan or sell the home, the lender will eventually step in. It’s important to note that all remaining equity goes to your heirs once the loan is repaid.
If your heirs inherit a home with more debt than its value, they won’t owe anything extra. Instead of going through foreclosure, they can opt for a Deed in Lieu of Foreclosure, where they hand the property deed back to the lender.
Additionally, if there’s a shortfall between the loan balance and the home’s market value, your heirs won’t owe anything else, as reverse mortgages are non-recourse loans. This means the lender cannot pursue other assets, and the FHA covers any losses.
Can You Stay in Your Home If There’s No Equity Left?
With a reverse mortgage, you do not have to move out, even if there is no home equity left. One of the main benefits of a reverse mortgage is that you can continue living in the home for life, regardless of the loan balance. If there is equity, it belongs to you or your heirs.
However, if the equity is exhausted, you can still remain in the home, no matter how negative the loan balance becomes.
If you pass away or move into a healthcare facility for more than 12 consecutive months, your non-borrowing spouse may be able to stay in the home. However, they must meet HUD’s requirements, including being married to you at the time of the loan. They must also continue living in the home as their primary residence.
Bottom Line
Reverse mortgages, with 32,991 HECM endorsements in 2023 compared to 114,692 in 2009, remain a less popular choice compared to other home equity options. However, borrowers report higher financial satisfaction, with complaints making up less than 1% of mortgage-related issues in 2021.
After the borrower’s death, heirs can repay, sell, or walk away from the reverse mortgage without owing anything, preventing foreclosure. If a co-borrower is involved, they must also meet the loan’s requirements. Additionally, property taxes must be kept up to date to avoid the loan becoming due.
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Sources
- Finance of America. Reverse Mortgage Facts and Statistics. Finance of America. Published 2024. Evaluated Mar. 19, 2025.
Link Here - Consumer Financial Protection Bureau. What Happens to My Reverse Mortgage When I Die? Consumer Financial Protection Bureau. Published 2024. Evaluated Mar. 19, 2025.
Link Here - Reverse Mortgage. What Happens to a Reverse Mortgage After Death. Reverse Mortgage. Published 2024. Evaluated Mar. 19, 2025.
Link Here - Reverse Mortgage. The Truth About Reverse Mortgages. Reverse Mortgage. Published 2024. Evaluated Mar. 19, 2025.
Link Here - Investopedia. Reverse Mortgages in America: Facts and Statistics. Investopedia. Published 2024. Evaluated Mar. 19, 2025.
Link Here - Consumer Financial Protection Bureau. What Happens to My Reverse Mortgage When I Die? Consumer Financial Protection Bureau. Published 2024. Evaluated Mar. 19, 2025.
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