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Inheriting a home can be a significant financial and emotional event. But when that home has a reverse mortgage, the process becomes more complex. In this article, we will explore what happens when you inherit a home with a reverse mortgage, the options available to heirs, and important considerations when managing this type of inheritance.A reverse mortgage allows homeowners aged 62 or older to convert part of their home’s equity into cash. Unlike traditional mortgages, where borrowers make monthly payments, reverse mortgages provide payments to the homeowner. The loan is repaid when the borrower sells the home, moves out permanently, or passes away. At that point, the loan balance, which includes the amount borrowed plus accrued interest and fees, must be paid off.

When the borrower of a reverse mortgage dies, the loan becomes due. The lender will require repayment of the loan balance, which is typically done through the sale of the home. However, heirs have several options when dealing with a reverse mortgage on an inherited home.

Heirs have the option to keep the home by paying off the reverse mortgage. They can do this by either paying the loan balance in full or by paying 95% of the home’s appraised value, whichever is less. This can be done using personal funds, refinancing, or obtaining a traditional mortgage. Once the loan is repaid, the heirs will own the home free and clear.