What happens to a reverse mortgage when the borrower dies?

When does the loan become due?

A HECM becomes due when a borrower dies and the home isn't the main home of at least one surviving borrower. It can also come due for other reasons, such as moving out, being away more than 12 months in a row because of illness, or not paying property taxes and insurance.

What are the heirs' options?

When the loan becomes due, the lender sends the heirs a notice. The CFPB says they then have 30 days to buy the home, sell it or turn it over to the lender to settle the debt. It may be possible to extend that time up to six months. Talk to the loan servicer early.

What if the home is worth less than the loan?

You never owe more than the home is worth. The CFPB says that if the balance is more than the home's value, heirs won't have to pay more than 95 percent of the appraised value. FHA mortgage insurance covers the rest.

What about a spouse who wasn't on the loan?

For loans with case numbers from August 4, 2014 on, an eligible non-borrowing spouse can stay in the home after the borrower dies. To qualify, they must have been married to the borrower at closing, be named in the loan papers, live in the home, and show within 90 days that they own it or have a legal right to stay for life. They don't get any more money from the loan.