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What Happens When the Borrower Passes Away?
How heirs are treated, what their choices are, and what timelines typically apply.
4 min read
When the last borrower passes away, the loan becomes due and payable. Heirs are generally given a period of time to decide what to do, and lenders commonly allow extensions while a sale is arranged.
Heirs typically have several choices: sell the home and keep any remaining equity, refinance the balance into a traditional mortgage and keep the home, or hand the property back to the lender with no further obligation.
HECM loans are non-recourse. If the loan balance is higher than the home's value at the time it is repaid, the borrower and heirs are not personally liable for the shortfall — FHA insurance covers the difference.
Involving adult children early usually makes this step much easier, which is why family participation is welcome in every conversation.
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