A Comprehensive Guide to Repaying a Reverse Mortgage

21 August 2025

Reverse mortgages can be a great way for homeowners, especially retirees, to access cash by leveraging the equity in their homes. But what happens when it’s time to pay it back? If you're wondering how to repay a reverse mortgage, you're in the right place!

In this guide, we'll break it all down in simple terms—no confusing jargon, no legal mumbo-jumbo—just a clear and straightforward explanation of your options. Let’s dive in!

What is a Reverse Mortgage?

Before we jump into repayment, let’s take a quick refresher on what a reverse mortgage actually is.

A reverse mortgage is a loan available to homeowners aged 62 or older that allows them to convert part of their home equity into cash, without having to sell their home or make monthly payments. Instead of paying the lender every month, the lender pays you—either as a lump sum, line of credit, or monthly payments.

Sounds great, right? It can be, but it’s important to understand that the loan must eventually be repaid. So, let’s talk about how that works.

When Does a Reverse Mortgage Need to Be Repaid?

Unlike traditional mortgages, where you make monthly payments, a reverse mortgage becomes due when one of the following happens:

- The borrower sells the home
- The borrower moves out of the home permanently
- The borrower passes away
- The borrower fails to meet loan obligations such as paying property taxes or homeowners insurance

Once one of these events occurs, the loan must be repaid—typically within six months. However, extensions may be granted in certain situations.

How to Repay a Reverse Mortgage

If you (or your heirs) need to repay a reverse mortgage, you have several options. Let’s go through them one by one.

1. Sell the Home

One of the most common ways to repay a reverse mortgage is by selling the home. Since the loan is secured by your home, the proceeds from the sale go toward paying off the loan balance.

- If the home sells for more than the loan amount, the extra cash goes to you or your heirs.
- If the home sells for less than the loan balance, the Federal Housing Administration (FHA) insurance (for government-backed loans) covers the difference, and your heirs aren't responsible for paying the shortfall.

This is a popular option because it simplifies repayment and often leaves heirs with additional funds.

2. Refinance the Loan

If your heirs want to keep the home, they can refinance the reverse mortgage into a traditional mortgage. This allows them to spread out payments over time rather than paying the entire balance at once.

3. Pay Off the Loan with Savings or Life Insurance

For those who have sufficient savings or a life insurance payout, using these funds to pay off the reverse mortgage can help keep the home in the family while avoiding additional debt.

4. Deed in Lieu of Foreclosure

If the home is worth less than the remaining loan balance and selling isn't a good option, you can sign the home over to the lender. This is called a deed in lieu of foreclosure and helps avoid the legal and financial stress of a foreclosure.

5. Home Sale by Heirs

When the homeowner passes away, heirs have the option to either keep the home (by paying off the loan) or sell it. Most heirs choose to sell because they may not want to take on mortgage payments or maintenance costs.

Common Concerns About Repaying a Reverse Mortgage

Now that we’ve covered the repayment options, let’s address some common concerns that people have.

What If the Loan Balance Is Higher Than the Home’s Value?

This is a big concern for many homeowners and heirs. The good news? Reverse mortgages are non-recourse loans. That means you or your heirs won’t owe more than the home is worth, even if the loan balance exceeds the home’s value. The lender takes the loss, not you.

Can a Reverse Mortgage Lender Go After My Other Assets?

Nope! Reverse mortgages are secured by your home only. Your retirement accounts, savings, and other assets are safe from the lender.

Do I Have to Pay Off the Loan Right Away?

Not necessarily. After the homeowner passes away or moves out, the heirs generally have six months to either pay off the loan, sell the home, or refinance. If more time is needed, an extension may be possible.

What Happens If I Move into a Nursing Home or Assisted Living?

If you move out of your home for more than 12 consecutive months, the loan becomes due. At that point, you or your family must decide whether to sell the home, pay off the loan, or refinance.

Tips for Managing a Reverse Mortgage Wisely

Now that we’ve covered repayment, let’s talk about managing a reverse mortgage responsibly to avoid potential pitfalls.

1. Keep Up with Property Taxes and Insurance

Even though you don’t have monthly mortgage payments, you’re still responsible for property taxes, homeowners insurance, and maintenance. Failing to keep up with these can result in foreclosure.

2. Communicate with Your Heirs

If your heirs will be responsible for handling the reverse mortgage repayment, make sure they know what to expect. Keep them in the loop so they’re not surprised when the time comes.

3. Consider Setting Aside Funds for Repayment

If you want your heirs to keep the home, consider setting aside savings or securing a life insurance policy to cover the loan balance. This will make repayment much easier for them.

4. Plan Your Exit Strategy

While no one likes to think about moving out or passing away, having a clear plan in place for how the reverse mortgage will be repaid can make things much smoother for your loved ones.

Final Thoughts

Repaying a reverse mortgage might sound intimidating, but it doesn’t have to be! Whether you choose to sell the home, refinance, or pay off the balance with savings, there are plenty of options available. The key is understanding your choices and planning ahead to ensure a smooth process.

If you or your heirs are dealing with a reverse mortgage repayment, don’t hesitate to reach out to a financial advisor or mortgage expert for guidance. Knowledge is power, and with the right plan in place, handling a reverse mortgage can be a stress-free experience.