To get out of a reverse mortgage, you have to clear the loan balance — by paying it off with cash, refinancing into a regular mortgage, selling the home, or, if you just signed, canceling the loan within the three-day rescission window. Heirs have their own path, with deadlines and a cap on personal liability. Which option fits depends on how much equity is left in the home and whether you’re the borrower, a surviving spouse, or an heir.
Cancel Within Three Days of Signing
If you just closed on a reverse mortgage and have changed your mind, the Truth in Lending Act gives you until midnight of the third business day to walk away without owing anything.1eCFR. 12 CFR 1026.23 – Right of Rescission The clock starts on the latest of three dates: the day you signed, the day you got the Truth in Lending disclosure, or the day you received two copies of the rescission notice. Saturdays count as business days for this purpose; Sundays and federal holidays do not.
Notify the lender in writing before the deadline. Mail, email, or any other written form works, and a mailed notice counts as delivered the day you send it, so a postmark before midnight on day three is enough.1eCFR. 12 CFR 1026.23 – Right of Rescission Once you cancel, the lender’s lien on your home becomes void.
If the Lender Didn’t Give You the Required Notices
The three-day window only closes if the lender actually delivered the rescission notice and required financial disclosures. If those documents were never handed over, your right to rescind stretches for up to three years after closing, or until you sell the home, whichever comes first.2Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions Talk to a HUD-approved housing counselor or an attorney before trying to exercise this extended right, since you’ll need to show the disclosures were missing.
Pay Off the Balance in Cash
The most direct exit while keeping the home is to pay the loan off in full. Ask your servicer for an official payoff statement, giving them your loan number and the exact date you plan to settle so interest is calculated through that day. The statement breaks down the principal you’ve drawn, accrued interest, and mortgage insurance premiums.
Payment usually goes to the servicer by wire or certified check. Once the balance hits zero, the servicer records a satisfaction of mortgage in your county land records and the lien comes off your title. A HECM has no prepayment penalty, so paying early costs you nothing extra.3eCFR. 24 CFR 206.27 – Mortgage Provisions
Refinance Into a Traditional Mortgage
If you want to keep the home but don’t have the cash on hand, refinance the reverse mortgage into a standard forward mortgage. The new lender coordinates the payoff with your current servicer at closing: the new loan pays off the reverse mortgage, the old lien is released, and you start making regular monthly payments.
This stops the rising balance and lets you build equity again. You’ll need to qualify based on income, credit, and the home’s appraised value, the same as any other mortgage.
Sell the Home
Selling is the most common exit once a borrower has moved out or died. How it plays out depends on whether the home is worth more or less than the loan balance.
If the Home Is Worth More Than You Owe
A standard sale handles it. The closing agent pays the servicer the amount on the payoff statement out of the buyer’s funds, and whatever is left is yours (or your heirs’). While the loan is still current, you can sell for at least the lesser of the loan balance or the appraised value.4eCFR. 24 CFR 206.125 – Acquisition and Sale of the Property
If You Owe More Than the Home Is Worth
A HECM is a non-recourse loan. Neither the borrower nor the estate is personally liable for anything beyond the value of the property; the lender’s only remedy is the home itself, and FHA insurance covers the shortfall.3eCFR. 24 CFR 206.27 – Mortgage Provisions
When the loan is due and payable, heirs can sell the property for a price no less than an amount set by HUD, which cannot exceed 95 percent of the current appraised value.4eCFR. 24 CFR 206.125 – Acquisition and Sale of the Property Closing costs on such a sale are capped at the greater of 11 percent of the sales price or a fixed dollar amount published by HUD. In practice, that lets heirs sell an underwater home, apply the net proceeds to the loan, and owe nothing on the rest.
Sign the Home Over With a Deed in Lieu
If the loan is underwater and no one in the family wants the property, a deed in lieu of foreclosure is the cleanest way out. You or the estate voluntarily transfer the title to the lender, and the debt is treated as satisfied. It avoids the cost and delay of a foreclosure case.
Submit a written request to the servicer. The lender will usually require the home to be left broom-clean, with personal belongings and debris removed. An executor or authorized representative signs and records the deed in the local land records. Once it’s recorded, the mortgage obligation ends and no one in the family is on the hook for future taxes, insurance, or upkeep.
If You’re an Heir: Deadlines and Extensions
When the last surviving borrower dies, the servicer sends a due-and-payable notice to the estate and heirs. You have 30 days from that notice to tell the servicer your plan: pay off the balance, sell, or hand over the property through a deed in lieu.4eCFR. 24 CFR 206.125 – Acquisition and Sale of the Property Miss the window and the servicer can start foreclosure.
If you need more time to list and sell, ask for an extension. HUD allows up to two additional 90-day extensions on top of the initial six-month foreclosure timeline, so you can potentially get about 12 months from the due-and-payable date.5Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die? You have to show real progress: active marketing of the property, or a financing application in motion. Waiting for probate to wrap up on its own doesn’t count.
Report the death to the servicer right away, and send the death certificate, will, trust, and any probate paperwork as soon as you have them. If an extension isn’t requested and approved before the loan is referred to a foreclosure attorney, legal fees start piling onto the balance.
If You’re a Non-Borrowing Spouse
You may be able to stay in the home after your spouse dies or moves permanently to a care facility, even if you were never on the loan. Federal rules let an “eligible non-borrowing spouse” defer the due-and-payable date when specific conditions are met.6eCFR. 24 CFR 206.55 – Deferral of Due and Payable Status for Eligible Non-Borrowing Spouses
To qualify, you must have been married to the borrower when the loan was signed and stayed married through the borrower’s lifetime, been named in the loan documents as an eligible non-borrowing spouse at origination, and lived in the home as your primary residence the whole time. After the borrower’s death, you also have to establish a legal ownership interest or life estate in the property within 90 days and keep meeting the loan obligations: property taxes paid, insurance kept up, home maintained.6eCFR. 24 CFR 206.55 – Deferral of Due and Payable Status for Eligible Non-Borrowing Spouses
You won’t get any new loan disbursements during the deferral. But you can stay in the home without repaying the loan. If you move out or slip on any of the requirements, the deferral ends and the balance is due.
Tax Consequences of Exiting
Because a HECM is non-recourse, a forgiven balance after the home is sold or surrendered generally isn’t taxed as cancellation-of-debt income. When a lender forgives non-recourse debt by taking the property, the IRS treats it as a sale of the home rather than ordinary income.7Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not? There may still be capital-gains implications depending on the home’s cost basis and sale price.
The interest that accumulated on the reverse mortgage is generally not deductible when you finally pay it. The IRS treats reverse mortgage interest as home equity debt interest, which is deductible only if the borrowed funds were used to buy, build, or substantially improve the home securing the loan.8Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction Most borrowers use the proceeds for living expenses, so the interest usually doesn’t qualify. Talk to a tax professional if you spent a meaningful share of the funds on renovations.
Where to Get Help
If you’re not sure which exit fits your situation, a HUD-approved housing counselor can walk you through the numbers on paying off versus selling versus refinancing, and explain the extension deadlines that apply to heirs. Counseling is free or low-cost.9Consumer Financial Protection Bureau. Find a Housing Counselor Search by ZIP code on the CFPB’s site or call 1-855-411-2372.