In the event of death or in the event that the home ceases to be the primary residence for more than 12 months, the homeowner’s estate can choose to repay the reverse mortgage or put the home up for sale.
If the equity in the home is higher than the balance of the loan, the remaining equity belongs to the estate.
If the sale of the home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA. No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from the estate to pay off the reverse mortgage.
If the borrower leaves the home to a family member, the family member then has the option to either pay off the existing loan balance, or sell the home and keep the difference. The inheritor does not assume responsibility for any debt, nor ever has to pay off the existing balance from the reverse mortgage.