It isn't possible to add another person to an existing reverse mortgage. To add someone to your mortgage, you would need to refinance or get a new loan.
A reverse mortgage loan becomes due and payable after your death and after the death of any coborrowers or of an eligible nonborrowing spouse. Once your heirs receive a due and payable notice from the lender, they have 30 days to buy, sell, or turn the home over to the lender to satisfy the debt.
Anybody can pay off a reverse mortgage, including the borrower, their spouse, their heirs or other relatives. This is most common in scenarios where the last surviving borrower or eligible non-borrowing spouse dies, and the heirs choose to make the reverse mortgage payoff.
Heirs can inherit a home with a reverse mortgage but will be responsible for settling the debt, either by paying it off, selling the home, or turning it over to the bank.
Key Takeaways
A reverse mortgage can't be transferred to another borrower. However, co-borrowers on the mortgage can keep it and remain in the home. Certain non-borrowing spouses are also eligible to remain in the home, although they won't receive further payments from the reverse mortgage.
If your reverse mortgage loan is in default and you've received a notice that the loan is “due and payable,” you may sell your home for 95 percent of its appraised value.
A reverse mortgage usually must be repaid when the borrower moves out for 12 consecutive months or more, such as into a nursing home or other care facility. If the borrower is married, their spouse can remain in the home under certain conditions.
Selling a house with a reverse mortgage isn't as simple as selling a home with a traditional mortgage — but it can be done with a little planning. With a reverse mortgage, you borrow against the equity in your property to receive cash upfront or a stream of monthly payments.
The right to potentially assume (take over) the mortgage.
All successors in California have a right to apply for an assumption of the loan, as long as the loan is assumable. The servicer may evaluate your creditworthiness, including your credit scores, when considering you for an assumption.
The problem, say advocates, is that many senior homeowners don't understand the fine print in a reverse mortgage. Some wrongly assume the lender will pay the taxes and insurance. But fall behind on those payments or fail to maintain the home, and the lender can foreclose.
No, a mortgage can't remain under a deceased person's name. When the borrower passes away, the loan won't disappear. Instead, it needs to be paid. After the borrower passes, the responsibility for the mortgage payments immediately falls on the borrower's estate or heirs.
With a reverse mortgage, the title of the home remains in the borrower's name. Proceeds from a reverse mortgage can be used as a down payment on a second home in some cases , or help supplement retirement income to cover monthly expenses.
Reverse mortgage loans typically must be repaid, usually by selling the home, when the last borrower dies. However, non-borrowing spouses may be able to stay in the home if they meet certain criteria. Most reverse mortgages today are Home Equity Conversion Mortgages (HECMs).
The lender of the original mortgage must approve the mortgage assumption before the deal can be signed off on by either party. The homebuyer must apply for the assumable loan and meet the lender's requirements, such as having sufficient assets and being creditworthy.
This means that you and your family members or heirs will need to pay off the reverse mortgage in order to stay in the home. The exception is if you co-borrow your HECM with your spouse (or anyone else). In this case, your co-borrower can stay in the home even if you die or move out of the home.
Under reverse mortgages and traditional home mortgages, a property will serve as collateral when a borrower violates their end of the loan agreement. Only in this situation can a reverse mortgage company or bank take your home.
Reverse mortgages require the borrower to use the property as the primary residence for the lifetime of the loan.
Can a family member take over a reverse mortgage? Unfortunately, no. You cannot add a family member to an existing reverse mortgage. However, the surviving spouse may be eligible to continue receiving benefits by applying for a deferral through the HUD, even if they were not originally on the loan as a co-borrower.
A borrower can only take out a reverse mortgage on a home they own and live in for the majority of the year. If the borrower leaves the home for more than six consecutive months for a non-medical issue or 12 consecutive months for a medical issue, the loan will become due.
The 60% Utilization Rule
Home equity conversion mortgage HECM borrowers may only take the greater of 60% of their total available equity or the total amount of their mandatory obligations plus 10% in the first payout.
Usually, the borrower's heirs pay off the loan by selling the house securing the reverse mortgage. The proceeds from the sale are used to pay off the mortgage. If there's any money remaining after the loan is paid off, the heirs get to keep it.
If borrowers run out of available funds, they can stay in the house, provided they continue to live in and maintain it and stay current on required taxes and insurance. In this sense, they will not have outlived the mortgage, but they will have outlived their ability to borrow more money from it.