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For an FHA-insured Home Equity Conversion Mortgage (HECM), the loan usually becomes due when the home stops being your principal residence, you sell or transfer it, or the last surviving borrower dies. A qualifying non-borrowing spouse may be able to defer repayment. The lender does not automatically own the house: you or your estate retain ownership until the property is sold, transferred, or taken through a completed foreclosure.
If the home is sold, the outstanding balance is paid from the sale proceeds. Money left over belongs to the borrower or estate. If the proceeds are insufficient, HECM non-recourse rules generally limit repayment to the property’s sale proceeds, subject to the program’s procedures. Heirs can usually repay the balance and keep the home, sell it, or pursue another permitted disposition.
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Which reverse mortgages these rules describe
This article focuses on the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM), the principal FHA-insured reverse-mortgage program. “Reverse mortgage” can also mean a proprietary loan offered outside the FHA program. Those contracts may use different occupancy rules, deadlines, appraisal standards, or repayment options, so your loan agreement and servicer’s written instructions control if they differ from HECM rules.
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HUD’s September 2023 Handbook 7610.1 states: “The lender does not own the home and does not ‘get’ the home when the borrower or non-borrowing spouse passes away.” HUD’s HECM program guidance likewise says the borrower retains ownership and may sell and move, keeping sales proceeds above the reverse-mortgage balance.
What events make a HECM due
| Event | When the balance generally becomes due | What the owner or estate must do |
|---|---|---|
| Permanent move | The property is no longer the borrower’s principal residence. | Notify the servicer, obtain a payoff figure, and arrange a sale or another approved repayment method. |
| Extended illness-related absence | HUD’s September 2023 handbook identifies non-occupancy for more than 12 consecutive months as a due-and-payable event. | Discuss the facts and timing with the servicer; a temporary absence is not automatically the same as permanently moving. |
| Sale or ownership transfer | The home is sold or ownership is transferred. | Use the closing or transfer proceeds to satisfy the HECM under the servicer’s instructions. |
| Death | The last surviving borrower dies, unless an eligible non-borrowing spouse receives a deferral. | The personal representative or heirs should notify the servicer and choose repayment, sale, or another permitted disposition. |
| Failure to meet obligations | Required property charges, insurance, maintenance, or other loan conditions are not maintained. | Cure the default promptly and document payment or repairs with the servicer. |
The exact notice and timing depend on the case and the loan documents. Ask the servicer to identify the event they have recorded, the payoff amount, and the deadline in writing.
If you move out
Permanent relocation
A HECM is tied to the home being your principal residence. If you permanently relocate so that it is no longer your principal residence, the loan can become due and payable. Contact the servicer before moving, rather than waiting for an occupancy certification or mail notice to reveal the change.
Request a current payoff statement, ask whether a specific notice or appraisal is required, and confirm how long you may keep the loan open while marketing the property. Continue paying property taxes, homeowners insurance, assessments, and other required charges, and keep the home in good repair until the loan is paid or another resolution is completed.
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Temporary absence or medical stay
Being away for a short period is not automatically a permanent move. The circumstances, expected duration, and whether the home remains your principal residence matter. HUD’s September 2023 handbook lists more than 12 consecutive months of illness-related non-occupancy as a due-and-payable trigger. That is a policy timeframe, not a guarantee that every absence shorter than 12 months is harmless or that every longer absence is treated identically.
Tell the servicer why you are away, where you are living, and when you expect to return. Get its occupancy determination and any required certification in writing. If a spouse or caregiver remains in the house, that fact alone does not necessarily prevent a due event if the borrowing homeowner has permanently left.
Moving to another home
You may sell the HECM property and move. The existing reverse mortgage must be paid off before the FHA will insure a new HECM for Purchase loan, according to HUD guidance. Therefore, ask for the old loan’s payoff amount and compare it with the expected net proceeds and the cash needed to close on the next principal residence.
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How the sale proceeds are applied
At closing, the servicer provides the amount required to satisfy the HECM, including accrued interest and allowable charges through the payoff date. The closing agent normally sends that amount from the sale proceeds. You keep any remaining money after the HECM and normal selling costs are paid.
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For example, if a home sells for $400,000 and the verified HECM payoff is $250,000, the $150,000 difference is not owed to the lender. Real-estate commissions, taxes, repairs, and other transaction costs would still reduce the amount the borrower actually receives. Use a written net-proceeds estimate rather than the listing price when deciding whether a move is affordable.
When the sale price is below the balance
HECM loans are generally non-recourse. If the property sells for less than the outstanding balance, the lender generally accepts the sale proceeds as payment in full under the HECM process and may file an FHA insurance claim for the shortfall. The borrower, heirs, and estate are not ordinarily required to pay the difference from other assets, but the servicer must approve and document the sale and payoff correctly.
Do not sign a deed, transfer ownership, or close a sale without confirming the servicer’s requirements. An unauthorized transfer can create a separate default even if the proposed price seems reasonable.
Sale timing and property condition
Keep taxes, insurance, utilities needed to protect the property, and basic maintenance current while it is listed. Vacant or neglected property can lose value and may violate loan obligations. Ask the servicer how to handle repairs, inspections, access for agents, and insurance if you move out before closing.
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If the borrower dies
Death of the last surviving borrower
When the last surviving borrower dies, the HECM generally becomes due and payable. The personal representative or heirs should notify the servicer promptly, provide the death certificate and estate contact information it requests, and ask for the due-and-payable notice, payoff amount, and deadlines in writing.
Death does not transfer the home to the lender automatically. Title remains with the borrower’s estate or other lawful owner until the loan is paid, the home is sold, a deed in lieu is accepted, or foreclosure is completed.
Non-borrowing spouse protections
A spouse who was not listed as a borrower may qualify for a deferral period instead of immediate repayment. Eligibility depends on HUD requirements and facts such as the marriage, residency, and the spouse’s status under the HECM rules. The spouse must ask the servicer to evaluate the case and must continue meeting ongoing conditions, including occupancy and property-charge obligations where required.
Do not assume that being married or living in the home guarantees protection. Ask for the servicer’s determination and a list of documents and continuing duties.
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What heirs and an estate can do
| Choice | How it works | Important considerations |
|---|---|---|
| Repay and keep the home | Pay the amount required under the HECM rules and retain title. | Ask whether the HUD 95% option applies and obtain the current appraisal and deadline. |
| Sell the home | List and close a sale, using proceeds to satisfy the HECM. | Net proceeds after the payoff and selling costs go to the estate or heirs; market actively and document the listing. |
| Deed in lieu of foreclosure | Transfer the property to the lender if the servicer accepts that resolution. | Get written acceptance and release terms before signing anything. |
| Other estate disposition | Use a court-approved or servicer-approved process appropriate to the title and estate. | Coordinate with the personal representative, probate counsel, and the servicer. |
Keeping the home under the 95% rule
HUD’s handbook says heirs who want to keep the property may be able to purchase it for the lesser of the outstanding HECM balance or 95% of a timely lender-ordered appraisal. This is not a blanket discount on every reverse mortgage. Confirm that the case qualifies, that the appraisal is the one the lender orders, and that the offer and payment arrive by the stated deadline.
How much time heirs have
HUD’s September 2023 handbook says a lender may provide the heirs or estate six months to pay off a HECM. When the property is actively marketed, the lender may request up to two 90-day extensions from HUD. These are policy timeframes, not automatic guarantees. The servicer must send the notices, approve the marketing evidence, and confirm each extension. Missing a deadline can lead to foreclosure activity, so request every date in writing and calendar it.
Obligations that continue until payoff
- Property taxes and assessments: Pay them on time or follow any tax-reserve arrangement in the loan.
- Insurance: Maintain homeowners and any other coverage the loan requires, and report cancellations or material changes.
- Maintenance: Keep the property in saleable condition and repair damage promptly.
- Occupancy: Respond to occupancy certifications and tell the servicer about a move, extended care stay, or change in household status.
- Communication: Update mailing addresses, provide estate documents after death, and retain copies of notices, appraisals, listings, and payment confirmations.
Failure in any of these areas can make the loan due even if no move, sale, or death has occurred.
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Practical steps for a planned move or sale
- Call before changing residences. Tell the servicer whether the move is permanent, temporary, or medical, and ask how it affects principal-residence status.
- Order a payoff statement. Request the balance through an estimated closing date, daily interest, allowable fees, and instructions for wiring or closing-agent payment.
- Estimate net proceeds. Subtract the payoff, commissions, taxes, repairs, liens, and moving costs from a realistic sale price.
- Confirm the new-home plan. If you are considering an FHA-insured HECM for Purchase, verify that the old HECM will be paid in full before the new loan can be insured.
- Protect the property until closing. Keep insurance, taxes, utilities needed for protection, and maintenance current.
- Get the closing confirmation. Keep the settlement statement showing the reverse mortgage payoff and any remaining proceeds.
Practical steps after a borrower dies
- Notify the servicer promptly. Ask where to send the death certificate and who is authorized to speak for the estate.
- Request the written notice. Obtain the due-and-payable date, payoff amount, appraisal instructions, and extension procedure.
- Check for a non-borrowing spouse. Ask the servicer to evaluate deferral eligibility before taking steps that could affect occupancy.
- Secure the property and maintain charges. Keep insurance, taxes, assessments, and necessary repairs current while deciding.
- Choose a disposition. Compare repayment, sale, deed in lieu, or another approved option using the estate’s cash, the property’s market value, and the remaining deadline.
- Document every agreement. Save appraisal reports, listing activity, extension approvals, payoff figures, and proof of delivery.
How to compare the available choices
For a borrower deciding whether to move, compare the expected net sale proceeds with the current HECM balance, the cost of the next principal residence, and the risk of falling behind on property charges. A high listing price does not equal cash available after payoff and selling expenses.
For heirs, compare the amount needed to keep the home with its current market value and financing options. The 95%-of-appraised-value method may be relevant only when HUD’s conditions are met; ask the servicer for the appraisal and exact deadline rather than relying on an informal estimate. If selling, begin marketing early enough to support any extension request and keep evidence of active efforts.
Where to get case-specific help
Your servicer is the source for the current payoff, notices, appraisals, deadlines, and documentation requirements. HUD’s HECM counselor roster and national counseling resource can provide independent program education, particularly before a permanent move, a sale, or a decision by a surviving spouse. An estate attorney or housing counselor may also be appropriate when title, probate, multiple heirs, or a disputed occupancy status is involved. Proprietary reverse mortgages require a separate review of their contract terms.
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