What Happens to a House With a Reverse Mortgage After Death?
When a reverse mortgage borrower dies, their heirs typically have six months to decide whether to keep or sell the California property. The process involves specific legal requirements and financial considerations that families should understand upfront.
The Immediate Timeline After Death
Notification Period (Days 1-30)
- Lender must be formally notified of borrower's death
- Loan becomes due (but repayment isn't immediately required)
- Heirs receive a Due and Payable Notice
Decision Period (Months 1-6)
- Heirs must choose to:
- Sell the home
- Refinance into traditional mortgage
- Deed the property to lender (rare)
Extension Period (Months 7-12)
- Possible 6-month extension if actively marketing home
- Foreclosure may begin after 12 months
3 Options for Heirs
Sell the Property
How It Works:
- Proceeds first pay off reverse mortgage
- Remaining equity goes to heirs
- No personal liability if home sells for less than loan balance
Best For:
- Heirs who don't want the home
- Properties with significant equity
Keep the Home
Requirements:
- Pay off loan (via refinance or cash)
- Must qualify for new mortgage
- Must move in within 60 days of payoff
Best For:
- Heirs who want to retain family home
- Those with financial means to qualify
Walk Away (Deed in Lieu)
How It Works:
- Voluntarily transfer title to lender
- No sale required
- No deficiency judgment (HECM loans only)
Best For:
- Underwater properties
- Heirs who can't afford options 1 or 2
California-Specific Considerations
Non-Recourse Protection
- Federal HECM loans can't pursue heirs for shortage
- Some proprietary reverse mortgages may differ
Probate Requirements
- Even if will exists, court may need to confirm executor
- Adds 2-4 months to process
Property Tax Implications
- Prop 19 may affect inherited tax basis
- Annual taxes reassessed at market value
Find What It's Like Working with Semi Homes
Why Selling Often Makes Sense
For heirs who:
✔ Want to avoid refinancing hurdles
✔ Need to distribute proceeds quickly
✔ Don't want ongoing property costs
Cash buyers like Semi Homes can:
- Close in 30 days (vs. lender's 12-month max)
- Purchase as-is (no repairs needed)
- Handle all lender negotiations
Frequently Asked Questions
Can grandchildren inherit a reverse mortgage home?
Only if named in will/trust - otherwise it goes to surviving spouse or children first.
What if the home is worth less than the loan?
With HECM loans, heirs owe nothing beyond the home's value (non-recourse).
Do heirs have to pay capital gains tax?
Only on proceeds above the stepped-up basis (value at time of death).
Can you extend beyond 12 months?
Rarely - lenders typically foreclose at the 1-year mark if not resolved.
How fast can Semi Homes close?
We've completed reverse mortgage heir sales in 21 days by working directly with lenders.
Need to Resolve a Reverse Mortgage Property?
If you're handling an inherited home with a reverse mortgage, Semi Homes provides:
- Same-day cash offers
- Lender payoff coordination
- Probate sale expertise
- No-obligation consultations
Don't risk foreclosure - contact us today to discuss your specific situation and timeline.