What If the Probate House Has a Reverse Mortgage in MD?

A reverse mortgage does not stop the borrower from selling the home, and it does not disappear when the borrower dies. This page covers both situations: selling while the borrower is still alive, and what happens after death in Maryland, including the heirs' 30-day window, the 95% rule, and the non-recourse protection. If the house in probate carries a reverse mortgage, acting on the notices quickly gives the estate the most options.

Can you sell a house with a reverse mortgage while the borrower is still alive?

Yes. A reverse mortgage does not stop the borrower from selling. The loan is paid back from the sale proceeds at closing, and any money left over belongs to the borrower.

• A HECM becomes due when the last surviving borrower sells the home (CFPB: When do I have to pay back a reverse mortgage loan?).
• How the payoff works at closing: the sale proceeds pay off the loan plus accrued interest and fees, and if the sale price exceeds the balance, the borrower keeps the difference (CFPB: What happens if I have a reverse mortgage and I want to sell my home?).
• For the practical steps a living borrower follows, see Selling a Home With a Reverse Mortgage: Things You Should Know.

What happens to a reverse mortgage after the borrower dies in Maryland?

The loan becomes due and payable, and the servicer sends a due-and-payable notice. Heirs have 30 days from the notice to pay off the loan, sell the home, or turn it over to the lender. That timeline may be extended up to six months (CFPB), and HUD can approve additional time. Heirs are not required to pay more than the home is worth; FHA mortgage insurance covers the difference.

In 2023 I worked with a family in Prince George's County after their parent passed away with a HECM reverse mortgage on the house. They tried to refinance so they could keep it, but couldn't qualify, and the clock on the loan was running. We listed it, sold it before the lender started foreclosure, and after the reverse mortgage was paid off, the family still walked away with money from the sale. That isn't always how it goes. Many families I talk to let the house go to the lender, because once the loan balance and fees have grown for years the home is worth less than what's owed, and selling isn't worth the effort. Because a HECM is non-recourse, they don't owe the difference.

• The loan is due when the last borrower, co-borrower, or eligible non-borrowing spouse dies (CFPB: What happens to my reverse mortgage when I die? and CFPB: When do I have to pay back a reverse mortgage loan?).
• The servicer must notify the estate or heirs within 30 days of notifying HUD of the borrower's death. Mortgagee Letter 2022-15 moved the deadline "from within 30 days of the date of the borrower's death to within 30 days of providing notice of the borrower's death to the Secretary" (HUD Mortgagee Letter 2022-15 and 24 CFR 206.125(a)(2)).
• Heirs have 30 days from the notice to pay off, sell, or turn the home over to the lender (CFPB: With a reverse mortgage loan, can my heirs keep or sell my home after I die? and 24 CFR 206.125(a)(2)).
• If the loan isn't resolved, the lender must start foreclosure within six months of the loan's due date, unless HUD approves additional time (24 CFR 206.125(d)(1)). (24 CFR 206.125)
• The 95% rule: to keep the home, heirs pay the full loan balance; if the balance exceeds the home's value, the home can be sold for at least 95% of its appraised value to satisfy the debt (CFPB: Can my heirs keep or sell my home after I die? and the CFPB reverse mortgage discussion guide).
• Non-recourse: heirs are not required to pay more than the home is worth; FHA mortgage insurance covers the difference (CFPB: You have a reverse mortgage, know your rights and responsibilities and CFPB 242).
• Eligible non-borrowing spouse: for HECMs with FHA case numbers assigned on or after August 4, 2014, a spouse named in the loan documents who continues to live there as principal residence may remain without paying off the loan (CFPB: What happens to my reverse mortgage when I die? and the HUD FHA Q&A on staying in the home after a spouse passes away).

Send a written letter of intent within the 30-day window

After the due-and-payable notice arrives, the estate or heirs should respond in writing within the 30-day window. The letter of intent states which path you are taking: selling, paying off or refinancing, or transferring title to the lender. Putting the decision in writing keeps the resolution moving and gives the servicer the documentation it needs.

The three resolutions the notice lists

The notice lays out three ways to resolve the loan: pay it off; sell the home for at least the lesser of the loan balance or 95% of its appraised value; or deed the home to the lender. The right choice depends on the payoff balance, the home's value, and whether the estate has funds available.

Before choosing a path, run the estate's numbers with the Maryland probate cost calculator, then compare the payoff quote against a current market analysis of the home.

Frequently Asked Questions

Do heirs inherit the reverse mortgage? Not necessarily. The loan is tied to the property, and the lender will explain the available options after the borrower's death.

Can we sell a home with a reverse mortgage? Yes. Many inherited homes with reverse mortgages are sold during probate.

Will the estate receive any money? If the home's value exceeds the amount owed on the reverse mortgage and selling costs, the remaining equity generally belongs to the estate.

Should I contact the lender immediately? Yes. Early communication helps you understand deadlines and available options.

Do heirs owe the shortfall on an underwater reverse mortgage? For FHA-insured HECMs, heirs generally do not owe the shortfall if the reverse mortgage balance is more than the home is worth. The loan is non-recourse, meaning the lender looks to the home for repayment rather than pursuing heirs personally.

Can heirs refinance a reverse mortgage after the borrower dies? Heirs cannot refinance the existing reverse mortgage itself. But they can take out a new conventional mortgage on the property and use the proceeds to pay off the reverse mortgage balance. This requires qualifying for the new loan based on the heir's own credit, income, and the property's value.

Can I rent the house? Once the loan is resolved, yes. But during the resolution period, the property's status must be managed carefully.

What should heirs do before selling inherited property with a reverse mortgage? Before selling, heirs should confirm the payoff amount, resolution timeline, extension eligibility, and whether the loan balance exceeds the property value. The estate attorney and servicer should both be involved before listing. For more guidance, see carrying costs on inherited property in Maryland, the best way to sell inherited property, and the documents checklist for selling.

Next step: get the estate's net position in writing

A written payoff statement and a current appraisal tell you exactly what you're working with, and give the servicer the documentation it needs to grant more time. If selling is the path, compare multiple offers before committing.

If you're handling a Maryland probate property with a reverse mortgage, contact us today for a free consultation. We'll help you understand your options before making any decisions.

Marc Cormier is a licensed real estate professional with Berkshire Hathaway HomeServices PenFed Realty, based in Montgomery County, Maryland. He has 27+ years of experience and close to 1,000 homes sold, with a focus on probate, distressed properties, bankruptcy trustee sales, and downsizing for families across Maryland, DC, and Northern Virginia. He is the author of an Amazon best-selling book on probate real estate and holds the SRES (Seniors Real Estate Specialist) designation.

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