Inheriting a House with a Reverse Mortgage

Key Takeaways

• Inheriting a home with a reverse mortgage adds complexities to an already emotionally difficult situation.
• Homes with reverse mortgages on them cannot be transferred to other individuals. The loan must be paid off, or the beneficiaries must permanently depart the home.
• Beneficiaries of a property have several potential options to resolve the reverse mortgage debt.
• Working with a skilled Virginia estate administration attorney can help navigate the intricacies associated with reverse mortgage properties.

Inheriting a loved one’s home can be emotional but discovering that it comes with a reverse mortgage often adds confusion and stress to an already difficult situation.

If you do not act quickly or understand your rights, you could face foreclosure, mounting debt, or even loss of the home entirely.

At Virginia Beach Law Group, we help families navigate the legal and financial challenges of inherited real estate properties, giving you clear options and peace of mind. Contact us today to protect what’s yours.

How Does Inheriting a House Work if the Previous Owner Had a Reverse Mortgage?

Inheriting a home is not always a straightforward process in Virginia Beach, even if estate planning details are all in order. The property will typically need to pass through probate before assets are distributed.

However, when a reverse mortgage is involved, this adds another layer of complexity. When the borrower of a reverse mortgage passes away, the loan becomes due.

Heirs will still inherit the property but then must make a decision. Their options include:

• Paying off the reverse mortgage (if the home’s value exceeds the loan balance) by refinancing, using personal funds, or selling the house
• Walking away if the loan balance exceeds the home’s value, allowing the lender to foreclose

Heirs can also file a list of heirs at the courthouse to establish ownership but may avoid probate taxes by not formally engaging with the probate office.

Once the bill due notice arrives, the heirs have 30 days to repay the debt. If the money is not paid within six months after an individual dies, the lender can begin the foreclosure process.

Lenders will sometimes work with the heirs if they know the family is actively selling the house or raising funds to pay off the debt.

Anyone who finds themselves inheriting a reverse mortgage scenario should consider consulting with an experienced attorney as soon as possible.

Do I Have to Pay Inheritance Tax on the House?

In many states, when beneficiaries receive property, they will be subject to an inheritance tax. Virginia repealed its tax on July 1, 2007, and left a few exceptions. In 2025, inheritance tax does not apply unless the estate exceeds $13.99 million.

Probate tax may apply if heirs engage with the probate office. To avoid this, heirs should mail the list of heirs without disclosing property details to the probate clerk.

Can a Reverse Mortgage Be Transferred to Another Person?

No, reverse mortgages are not typically transferable to another individual.

Heirs cannot assume the reverse mortgage—they must either settle the debt or forfeit the property to the lender. What will likely happen in most scenarios is that the debt gets paid off with the funds that come from the estate.

The loan must be paid in full upon the borrower’s death or permanent departure from the home. The bank does not care where the funds come from, as long as the entire debt is paid off when it comes due.

What Do My Heirs Need to Do to Inherit This House?

If you take out a reverse mortgage, your heirs will need to know they have to close out the loan by:

• Paying off the lender that issued the reverse mortgage
• Securing a new loan in their name to pay the debt

To inherit your home, your heirs can do the following:

• File a list of HEIRS (a one-page document) at the courthouse to formally record ownership.
• Avoid probate by mailing this document instead of meeting with probate officials, which prevents triggering probate taxes.
• If the mortgage balance exceeds the home’s value, heirs may choose not to file anything, leaving the lender to foreclose.

What Happens When the Reverse Mortgage Comes Due?

The reverse mortgage becomes due when the borrower dies or permanently vacates the home (e.g., moves to a nursing home without intent to return). Remember, the lender will foreclose if the debt is not repaid.

If you inherit a home with a reverse mortgage, you must pay off the loan. In the event you cannot pay the balance yourself or with the funds from the estate, then you will have to find a different solution. If the property’s value exceeds the mortgage balance, you can:

• Refinance with a traditional mortgage
• Use personal funds to pay the mortgage
• Sell the house to repay the debt in full
• Walk away and let the lender foreclose on the property

In some cases, these solutions may not be the best course of action. For example, selling the house is only viable if the sale price covers the reverse mortgage balance. If not, all proceeds go to the lender.

Heirs can avoid liability by not filing a list of heirs, effectively disclaiming ownership and avoiding a trigger of probate tax since ownership is not established at the courthouse.

Why Clients Choose Virginia Beach Law Group

Clients who select Virginia Beach Law Group to represent them know they can count on our compassionate attorneys to provide honest and transparent legal advice. Our law firm is known for its extensive experience and knowledge of real estate, and for putting our clients’ needs first.

It is sometimes confusing to know what steps to take after losing a loved one. However, the legal team at Virginia Beach Law Group is able to support you through the complexities of probate and estate administration during this difficult time.

Should you choose Virginia Beach Law Group to manage your legal issue, you can rest assured that we give full commitment to every case we handle and trust you will receive excellence in customer service.

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Worried About Leaving Your House with a Reverse Mortgage?

If your familial home has a reverse mortgage attached to it, the estate planning lawyers at Virginia Beach Law Group have extensive experience in this type of scenario. Our legal team can help you navigate the complexities of reverse mortgage properties by identifying the best solutions on how to handle the situation.

Don’t get left with an expensive inheritance. Instead, let our attorneys help you avoid a potentially costly situation. Our law firm proudly serves Virginia Beach and the surrounding areas. Get in touch with our team today at 757-486-4529 to schedule an initial consultation or, if you prefer, fill out our online contact form.