Can my children inherit my estate if I have a reverse mortgage on my home?

The Answer is YES.

An FHA-insured reverse mortgage or HECM is just like any other traditional mortgage in the fact that a loan is made by a lender, to a borrower, using the home as security or collateral. You remain on title and have full ownership rights, including the right to will your remaining equity to your heirs. Your lender is NOT on title with you.

When one sells their home or passes away, the estate would first repay the balance on the reverse mortgage, plus interest and fees, to the reverse mortgage lender. The remaining equity in the home, if any, belongs to you or your heirs.

There is no difference between a traditional mortgage and an FHA-insured reverse mortgage when it comes to your right to will your equity to your heirs. They both allow you the same benefit.

Example Scenario

– A 75-year old woman owns a $300,000 property free and clear.

– She is eligible for $190,000 from a HECM reverse mortgage and receives a lump sum payment.

– When she passes away, her heirs intend to sell the property.

– Total accumulated interest over the life of the loan was $68,060.

– The estate sells the home for $320,000.

– The estate uses the proceeds from the sale to repay the reverse mortgage balance of $258,060.
[ $190,000 original loan + $68,060 interest & fees = $258,060 ]

– The estate inherits a net amount of $61,940 minus any closing fees.

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