Settling a Reverse Mortgage After a Parent Passes
A Step-by-Step Guide for Heirs
JP Dauber · Licensed HECM Specialist
NMLS# 386298 · Published September 18, 2026
Step 1: notify the servicer
As soon as practical, contact the loan servicer to let them know the last borrower has passed. You can find the servicer on recent statements or the closing packet.
Provide a death certificate when you have it. This formally starts the settlement process and stops confusion or missed notices.
Step 2: the due-and-payable letter
The servicer will send a due-and-payable letter confirming the loan is now due and explaining your options and the timeline. Read it carefully and keep it.
This letter is not a foreclosure notice. It is the start of an orderly process with clear choices, the same ones outlined for heirs after death.
Step 3: get an appraisal and know the numbers
The servicer typically orders an appraisal, or accepts one, to establish the home's current value. Compare that value to the loan balance.
If there is equity, selling leaves money for the heirs. If the balance exceeds the value, non-recourse means you can satisfy the loan at 95% of the appraised value, or hand the home back with nothing else at risk.
Key fact
Respond to the servicer's letters and keep communicating. The most common avoidable problem in settling a reverse mortgage is silence — staying in contact is what keeps your timeline and extension options open.
Step 4: choose your path
Your three choices: sell the home and keep any equity above the balance, keep the home by paying off the loan (often via refinance), or deed it back if there is no equity worth pursuing.
Heirs inherit the home at a stepped-up basis, which can minimize capital gains tax if you sell.
Step 5: mind the timeline
You generally have about six months to act, with extensions of up to a year possible if you are actively marketing the home. Document your efforts and keep the servicer updated.
Settling an estate is stressful enough. If you are facing this, reach out and I will help you understand the letters and your options step by step.
Keep reading
The complete guide
Heirs & Inheritance →
What Heirs Should Know Before Mom or Dad Gets a HECM →
If your parent is considering a reverse mortgage, here's what you as an heir should understand up front — the non-recourse guarantee, your options later, and how to stay informed.
Helping a Parent Apply With Power of Attorney →
Can you handle a parent's reverse mortgage with power of attorney? Often yes — here's what kind of POA is needed, what the lender checks, and how counseling works.
Reverse Mortgages, Step-Up Basis, and Your Estate →
When heirs inherit a home, they get a stepped-up cost basis that can erase decades of capital gains. A reverse mortgage doesn't change that. Here's how the two interact.
When One Heir Wants to Keep the Family Home →
A reverse mortgage comes due, but one sibling wants to keep the house. Here's how to pay off the loan, buy out other heirs fairly, and avoid family conflict.