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 →
Working With an Estate Planning Attorney When You Have a Reverse Mortgage →
When to consult an attorney about your HECM, what to ask, and how to protect your heirs.
Adult Child's Checklist: Evaluating a Reverse Mortgage for Mom or Dad →
10 questions to ask, what to verify, and how to support your parent's decision.
Helping Your Parents With Home Equity: A Guide for Adult Children →
When your parents are house-rich and cash-tight — how to explore their options together.
Protecting Your Inheritance: A Family Guide to Reverse Mortgages →
The real math on inheritance — and strategies to preserve equity for your family.