Skip Navigation

Welcome to Onity Mortgage. New name, same drive for excellence.

Learn More

Estate Planning and Your Reverse Mortgage

Planning for the future is one of the most important gifts you can give your loved ones. If you have a reverse mortgage, taking a few estate-planning steps now can help make things easier for your family later and ensure they understand their options regarding your home.


Why Estate Planning Matters

A reverse mortgage allows you to access a portion of your home's equity while continuing to own and live in your home. The loan generally becomes due when the last borrower permanently leaves the home or passes away. At that time, your heirs, estate representative, or trustee will need to work with the loan servicer to resolve the loan.

By preparing in advance, you can help reduce stress and confusion for your loved ones during a difficult time.


Key Estate Planning Steps

  1. Estate plan documents. Consider working with a qualified attorney to create or update your estate plan. Important documents may include:

    • A Last Will and Testament

    • A Revocable Living Trust (if appropriate for your situation)

    • Power of Attorney

    • Healthcare directives

  2. Make sure heirs know a reverse mortgage exists. When the last borrower passes away, the loan servicer will typically require documentation such as a death certificate, probate documents, will or trust documentation before discussing loan details with heirs or estate representatives. Consider having a conversation with your heirs or other trusted family members about:

    • The existence of the reverse mortgage

    • The approximate value of the home

    • Your wishes for the property

    • Where important loan and estate documents are kept

  3. Name and document decision makers. An executor, personal representative, trustee or a properly authorized Power of Attorney can help manage affairs if the borrower becomes incapacitated or dies. 

  4. Keep your records organized. Maintaining organized records can help your family navigate the process more easily. Consider keeping the following documents readily available to save time if your family needs to take action:

    • Reverse mortgage statements

    • Property tax records

    • Homeowners insurance information

    • Estate planning documents

    • Contact information for your attorney, executor, trustee and loan servicer


Heir's Options Upon Your Passing

When the borrower passes away, the reverse mortgage lender must be notified. Heirs generally have 30 days from the due and payable notice to decide on one of these paths:

  • Keep the home: Heirs can use cash or obtain a new mortgage to pay the total balance (original loan amount plus accrued interest and fees). 

  • Sell the home: Heirs can sell the property, use the proceeds to pay off the reverse mortgage, and keep any remaining equity. 

  • Other Loss Mitigation Options: Depending on eligibility and loan requirements, alternatives such as a short sale or deed-in-lieu of foreclosure may be available. 

  • Allow foreclosure if no other option is pursued.


Special Planning for Spouses

Some reverse mortgages may provide protections for eligible non-borrowing spouses. Eligibility requirements vary and depend on the loan program and circumstances. If you are married and only one spouse is listed as a borrower, consider discussing your situation with us or legal advisor as part of your estate planning process.


Estate Planning Checklist

✓ Maintain a current will and/or trust.
✓ Update beneficiary designations: Clearly dictate who gets the house and how other assets are distributed to balance any loss of home equity for your heirs. 
✓ Protect non-borrowing spouses: If only one spouse is on the reverse mortgage, the surviving non-borrowing spouse must meet specific HUD requirements to remain in the home without having to repay the loan immediately.
✓ Establish trust ownership: Putting a house with a reverse mortgage into a trust must meet certain requirements. Before making changes to a will or trust, review your loan documents to ensure you do not violate the due on sale or transfer clause. 
✓ Maintain life insurance or liquid cash: Because the reverse mortgage limits the equity left for inheritances, use other assets, such as a life insurance policy or a liquid savings account to leave a clear cash inheritance for your beneficiaries. 
  ✓ Inform family members where loan documents are located. 

Resources

  • Review the Consumer Financial Protection Bureau's website to understand the exact timeline and requirements for heirs. 

  • Local assistance: If you need assistance initiating a trust or updating your will, consider consulting a local estate planning attorney who is well versed in elder law and Home Equity Conversion Mortgages (HECMs).


Estate planning isn't just about documents, it's about helping your loved ones understand your wishes and preparing them for important decisions. Taking a few proactive steps today can provide peace of mind for both you and your family while helping ensure a smoother transition in the future.