We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
Checkmark Expert verified
Bankrate logoHow is this page expert verified?
At Bankrate, we take the accuracy of our content seriously.
“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Their reviews hold us accountable for publishing high-quality and trustworthy content.
Written by
Lara Vukelich
Lara Vukelich is a freelance writer who has written for Bankrate, Huffington Post and Quiet Revolution to Expedia, Travelocity, and MyMove. She is based in San Diego, California.
Edited by
Laurie Richards
Reviewed by
Robert R. Johnson
Robert R. Johnson, Ph.D., CFA, CAIA, is a professor of finance at Creighton University and chairman and CEO of Economic Index Associates, LLC.
Bankrate logoAt Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money .
Bankrate logoFounded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner.
Bankrate logoBankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
Bankrate logoYou have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
A reverse mortgage can make it possible for older homeowners to remain in their homes and supplement their retirement income. Instead of the borrower making monthly payments as with a mortgage, the borrower receives monthly payments from their mortgage lender. But the money will need to be repaid eventually. “You’ve already got a home, and the mortgage lender makes monthly payments to you, so they can get your house after you pass away,” says Tabitha Mazzara, director of operations at MBANC, a mortgage lender. Here’s how to pay back a reverse mortgage.
A reverse mortgage must be repaid in full if the last surviving borrower or eligible non-borrowing spouse:
The last scenario can occur if the borrower enters an assisted living facility, moves in with family or downsizes.
“Most people repay the loan when the owner dies, since the majority of people who use reverse mortgages are those who already have a significant amount of home equity,” says Cliff Auerswald, president of All Reverse Mortgage, a reverse mortgage lender.
There are other situations, though, when the loan could need to be repaid sooner. This can happen if the borrower stops paying homeowners insurance or property taxes on the home, or stops maintaining the home and it falls into disrepair.
There are several ways to pay back a reverse mortgage early or when it comes due. If you decide to do so, here’s how to get out of a reverse mortgage:
Once payment comes due, either the borrower or their heirs can decide to simply sell the home to pay off the loan. The proceeds of the sale go first toward paying off the lender. The borrower, or their estate, keeps whatever is left over after paying the debt.
Selling the home is still an option even if the home’s value is lower than the loan’s balance.
The Federal Housing Administration (FHA), the agency that backs home equity conversion mortgages (HECMs), the most common type of reverse mortgage, considers the loan terms satisfied if the borrower or heirs sell the home for 95 percent of its appraised value.
If you’re the borrower and you want to move out but still keep the home, you can refinance your reverse mortgage into a traditional mortgage loan. Just remember that you’ll need to start making payments on the new loan to keep the home.
“Refinancing it back into a traditional loan will mean having to make regular payments toward the mortgage again,” says Mazzara, “but it would also mean keeping the house as part of your estate.”
Learn more: Compare current refinance ratesIf the borrower’s heirs want to keep the home, they can simply take out a new mortgage on the house to pay off the balance of the reverse mortgage. This is much like refinancing the loan as the original borrower.
The heirs can then use the home however they wish, so long as their mortgage allows for it. For example, they might choose to live in the home or use it as an investment property.
If all else fails, the borrower or their heirs can simply give the deed to the home to the lender. This is known as a deed in lieu of foreclosure because it is usually the last resort before allowing the lender to foreclose on the home.
There are no rules that prevent you from paying off a reverse mortgage early. The most straightforward way to do so is to begin making payments on the loan ahead of time. This will also reduce the amount of interest you owe because interest won’t accrue on the balance paid off.
You could also get out of a reverse mortgage by paying a lump sum if you have the funds to do so. Or you can refinance the reverse mortgage debt into a conventional loan.
As life evolves or your needs change, you might realize that a reverse mortgage no longer makes sense for you. Some reasons to get out of a reverse mortgage include:
Anybody can pay off a reverse mortgage, including the borrower, their spouse, their heirs or other relatives. This is most common in scenarios where the last surviving borrower or eligible non-borrowing spouse dies, and the heirs choose to make the reverse mortgage payoff.
The lender will typically provide the heirs with repayment options, after which they’ll have 30 days to make a decision. Depending on where you live, you may have longer to actually pay off the loan.
“The exact time frame is usually decided by the state,” says Auerswald. “Most reverse mortgages are due within one to six months after the owner has died.”
Since a reverse mortgage is a loan, not income, it is not taxable when you’re receiving payments. You also can’t deduct the interest when you pay off the loan because this type of financing is subject to the limitations of home equity debt. According to the IRS, home equity debt is not deductible unless the proceeds are used to buy, build or substantially improve the home you’re borrowing against.
A reverse mortgage is a home loan. Like any home loan, if you are unable to pay when you’re supposed to, the loan will go into default. This will negatively affect your credit score and the lender may foreclose on the home
When the home is sold, or the borrower dies, the reverse loan becomes due and payable. However, your heirs might be able to negotiate a repayment in order to keep the home. They might want to consult with a financial advisor or real estate attorney to determine whether to sell the home to pay off the debt or hold onto the home and pay the loan with other funds.
Lara Vukelich is a freelance writer who has written for Bankrate, Huffington Post and Quiet Revolution to Expedia, Travelocity, and MyMove. She is based in San Diego, California.
