Myth or Fact – Must Sell Home to Repay Reverse Mortgage

Reverse Mortgage Myth: You have to sell your home to repay reverse mortgage

Reverse Mortgage Fact: Reverse mortgages can be paid back with other funds, refinanced into forward mortgage, or you can choose to repay by selling the home.

No, you don’t have to sell your home to repay a reverse mortgage—at least not while you’re still alive and living in it, as long as you meet the terms. But selling often becomes the go-to way to settle the loan later, especially after you pass away or move out.

While you’ve got the reverse mortgage, you’re the owner, and the bank’s just got a lien on the property, just like any other mortgage. You’re not making monthly payments—the loan balance grows with interest over time. You can stay in the home indefinitely if you keep up with property taxes, insurance, and maintenance.

The repayment kicks in when one of these happens: you die, you move out permanently or you decide to sell. At that point, the loan’s due, and you—or your heirs—have options. Selling the home is the most common route because it’s a straightforward way to cover the debt. Say your loan balance is $200,000 and the house is worth $300,000. You sell, the bank gets $200,000, and you or your heirs keep $100,000. 

But you don’t have to sell. You could pay it off another way—like with savings, a new mortgage, or other assets. For example, if your kids want to keep the house, they could refinance it with a $200,000 traditional mortgage and pay off the reverse mortgage, keeping the property in the family. Or, if you’ve got cash stashed away, you could settle it without touching the house.

How Reverse Mortgage Repayment Works:

When the Loan Becomes Due:

• • • A reverse mortgage typically becomes due when the borrower:
      • Moves out of the home permanently.
      • Sells the home.
      • Passes away.

Repayment Options:

• • Selling the Home:

• • • • • This is the most common method. The proceeds from the sale are used to pay off the loan balance, including accrued interest and fees.   
        • If the sale price exceeds the loan balance, the remaining equity goes to the borrower or their heirs.

• • Repaying the Loan with Other Funds:

• • • • • The borrower or their heirs can choose to repay the loan using other assets, such as savings or investments.   
        • This allows them to keep the home.

• • Heirs Keeping the Home:

• • • • In some cases, heirs may choose to refinance the reverse mortgage into a traditional mortgage to keep the home.   

Reverse mortgages can be a useful financial tool for eligible seniors looking to supplement income, pay for healthcare, or cover living expenses, but they also come with complexities that should be thoroughly understood before proceeding.

Learn more about eligibility requirements for a reverse mortgage, situations where a reverse mortgage is best used, and common myths around reverse mortgage that we debunk with facts