15 Can I Lose My Home?

You remain the owner of your home and can stay as long as you wish. Since you are still the homeowner, you must continue to pay hazard insurance, property taxes and continue with basic home maintenance during the loan period – but no other payments or conditions are required. If and when the home is sold, the loan is repaid (including accrued interest and any fees) and any remaining equity goes to you or your heirs.

In the case of death of the homeowner, the heirs inherit the home and keep any remaining equity after the outstanding balance is paid off.  In short, the origination of any type of HECM Reverse Mortgage does NOT transfer ownership of the real property to the bank or lending institution.  Only in the case of the death of the homeowner(s) without any heirs to the property will the bank take possession of the home.  Otherwise, the loan is repaid once the last remaining borrower moves out of the home. In most instances, the home is sold, the loan (including interest and any fees) is repaid, and any remaining equity goes to you or your heirs. If your heirs choose to keep the home, they can pay the HECM loan back by using such financial tools as refinancing the reverse mortgage. If they choose to sell the home, they are provided up to 12 months to complete the sale.

In the event of death or in the event that the home ceases to be the primary residence for more than 12 months, the homeowner’s estate can choose to repay the reverse mortgage loan or put the home up for sale.

If the equity in the home is higher than the balance of the loan when the home is sold to repay the loan, the remaining equity belongs to the estate.  If the sale of the home is insufficient to pay off the HECM, the lender takes a loss and requests reimbursement from the FHA. No other personal assets are affected by a reverse mortgage in any way. For example, investment and retirement accounts, second homes, automobiles, and other possessions cannot be extracted from the estate to pay off the reverse mortgage.