You don’t have to pay back the reverse mortgage if you’re the owner living in the house with the reverse mortgage. However, you will need to pay back the balance of the reverse mortgage if the owner dies, naming you the heir of the property — unless you are the surviving spouse. In that case you continue to receive the reverse mortgage payments while inheriting the house.
With a reverse mortgage, you take out a loan against your home equity and pay off the rest of the mortgage. The lender then pays back the remaining balance either as a lump sum or monthly installments.
If you are not the surviving spouse, you have three options to pay back the mortgage:
- Sell off the property and use the money to pay back the lender.
- Take out a “forward” mortgage to pay off the reverse mortgage balance.
- Pay off the mortgage using personal funds and keep the property.
If you decide to sell, the house may go for more than the mortgage balance and then you can benefit from the difference. If you want to keep the house, you may have to liquidate any existing assets or other sources of funds that the grantor (the person you inherited from) may have left for this purpose (this could be in the form of a life insurance policy or another property).
The last option would be to let the property go into foreclosure. The lender takes possession of the property to make up for the debt in case you aren’t able to pay off the reverse mortgage.
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