How to sell a home with a reverse mortgage

Written by Samantha SheltonNMLS 1647301Updated October 2026

This article is general information about reverse mortgage payoffs, not legal or tax advice. Program rules, servicer procedures and estate deadlines vary by loan and by state. Consult a Michigan real estate attorney and a qualified tax professional about your situation.

You can sell a home with a reverse mortgage whenever you want. The loan is a lien on the property, not a restriction on your title, and federal rules let you repay a Home Equity Conversion Mortgage (HECM) in full or in part at any time without charge or penalty. The number that governs everything after that is 95%: once the loan is due and payable, the property may be sold for an amount set by HUD that cannot exceed 95% of the appraised value, with the net proceeds applied to the balance and FHA insurance absorbing whatever is left.¹

A living borrower sells under a different rule. While the loan is not yet due and payable, the borrower or an authorized representative may sell for at least the lesser of the outstanding loan balance or the appraised value. The 95% figure governs only once the loan is due and payable (most often after the last borrower dies), and it exists because the loan is non-recourse: the borrower has no personal liability, and the servicer may enforce the debt only through sale of the property.

Learn what a reverse mortgage payoff statement contains, how the deadlines run after a borrower dies, and how to plan net proceeds around a balance that grew instead of shrank. If you’re earlier in the process, start with our Selling a Home guide.

Key takeaways:

• Non-recourse caps the payoff at 95%: Once the loan is due and payable, the home may be sold for a HUD-set amount that cannot exceed 95% of appraised value, the servicer accepts the net proceeds as satisfaction, and no one owes a deficiency.
• The real clock is 30 days, not six months: The due-and-payable notice gives the estate 30 days to pay, sell, or deed the property back; the six-month figure people repeat is the servicer’s deadline to start foreclosure, and extensions run 90 days at a time only with documented progress.
• Plan the net, not the price: A HECM balance grows every month from compounding interest plus a 0.5% annual FHA insurance premium, so get the payoff in writing before you set a list price. On a due-and-payable sale, closing costs cannot exceed the greater of 11% of the sales price or a HUD-published dollar amount.

Can I sell my home if I still owe on a reverse mortgage?

Yes. You hold title the entire time a reverse mortgage is outstanding, so you can list and sell like any other owner, and the loan is paid from the sale proceeds at closing the same way a forward mortgage is. Nothing in the program requires the servicer’s permission to sell.

What is different is the arithmetic. A HECM pays you, so the balance climbs instead of falling: interest accrues on every dollar advanced, the annual FHA mortgage insurance premium of 0.5% of the outstanding balance is added on top, and servicing charges are either built into the note rate at between 36 and 150 basis points or collected monthly from a set-aside. Our explainer on how reverse mortgages work covers the draw side; this article covers the exit.

The floor you can sell at depends on one question: has the loan become due and payable yet?

• Not yet due and payable: A living borrower still occupying the home may sell for at least the lesser of the outstanding loan balance or the appraised value. If the home is worth more than you owe, that is simply an ordinary sale with a large payoff.
• Due and payable: The balance comes due when the last surviving borrower dies and the home is not the principal residence of a surviving borrower, when a borrower conveys away all title, or when the property stops being a borrower’s principal residence. Now the sale floor is the HUD-determined amount capped at 95% of appraised value.

One trigger catches families off guard: failing to occupy the property for more than 12 consecutive months because of physical or mental illness also makes the loan due and payable. A hospital stay does not start that clock. A move into long-term care eventually does. HUD’s HECM reverse mortgage program rules set every one of these conditions.

How the non-recourse rule caps what you or your heirs owe

Heirs settling a HECM never pay more than the lesser of the loan balance or 95% of the appraised value, and they never owe a deficiency. The regulation states it plainly: the borrower has no personal liability for the outstanding loan balance, and the servicer enforces the debt only through sale of the property. FHA insurance, funded by the premiums the borrower paid for the life of the loan, covers the gap.

The appraisal makes the 95% figure real, and the rules around it are specific. The servicer must have the property appraised by an FHA-roster appraiser no later than 30 days after receiving the request in connection with a potential sale. Before the loan is due and payable, the requesting party pays for it; after, the servicer pays and is reimbursed from sale proceeds. Our walkthrough of the home appraisal process explains what the appraiser measures.

Hypothetical example, not an offer. With numbers: a family inherits a Waterford home carrying a HECM payoff of $322,000. The lender’s appraisal comes back at $290,000, putting the sale floor at $275,500. The estate sells at $280,000, above the floor, and the net proceeds satisfy the loan. FHA insurance absorbs the roughly $42,000 shortfall. No heir writes a check, and no deficiency follows anyone.²

Two cautions. The 95% path is a settlement mechanism, not a way to hand the house cheaply to a relative: any post-death transfer counts as a sale, and the servicer’s appraisal sets the number. And the servicer satisfies the mortgage of record to facilitate the sale only if there are no junior liens and all net proceeds from the sale go to the loan. The CFPB’s explanation of reverse mortgages is a good second read.

How to sell a home with a reverse mortgage, step by step

Five steps, and the first one prices everything after it.

1. Request the payoff statement in writing

Ask the servicer for a written payoff quote before anything else, with a per-diem figure so you can project it forward. Here is the detail almost every article gets wrong: the federal seven-business-day payoff deadline bends on a reverse mortgage. Regulation Z requires an accurate payoff statement within a reasonable time and in no case more than seven business days after a written request, but where the servicer cannot meet that window because the loan is a reverse mortgage, the statement is due within a reasonable time instead. Request early.

2. Get the value question answered independently

Order or review an appraisal so you know whether you are selling above the balance or into the 95% floor. Those are two different transactions, with different paperwork, different servicer involvement, and different expectations to set with heirs. A market analysis is fine for a first read; a written appraisal is what the servicer acts on.

3. Price against the payoff, not the comps alone

Take the projected payoff at your estimated closing date, add seller costs, and work backward. Commission is negotiable and always has been: since August 17, 2024, offers of buyer-agent compensation cannot be communicated through an MLS, and buyer agents must have written agreements before touring.

4. Clear everything else attached to the title

Order a title search early. Most sales die on the involuntary liens nobody knew about, not the mortgage everyone did. Delinquent property taxes, judgment liens and construction liens recorded under Michigan’s Construction Lien Act generally must be satisfied or released at closing; they do not travel with the buyer, and junior liens are exactly what block the 95% settlement path. See selling a home with a lien.

5. Close, satisfy, and record the release

At closing the title company wires the payoff and the servicer satisfies the mortgage of record. Anything left after payoff, liens and selling costs belongs to you or the estate. Confirm the release actually records; a satisfied reverse mortgage left on title is a problem you meet again later.

How long do heirs have to sell a home with a reverse mortgage?

Thirty days to respond, six months before foreclosure can begin, and 90-day extensions after that when you can document progress. The widely repeated “heirs get six months” compresses a longer sequence, and knowing the real one is the difference between a calm sale and a rushed one.

Servicers commonly describe the ceiling as two 90-day extensions, or roughly 12 months from the maturity event. The regulation sets no fixed cap, only “such additional time as may be approved by the Commissioner,” so treat 12 months as the outside case rather than the plan and get your deadline from the servicer in writing. Extensions reward documented marketing or financing progress, not the time probate takes, and Michigan estate administration runs on its own statutory calendar that does not bend for a servicer. Our guide to selling a home in probate covers letters of authority and the creditor-claim window, and the legal steps for heirs settling a reverse mortgage is a useful orientation. Neither replaces a Michigan real estate attorney reading your file.

What Michigan rules apply when an estate sells a reverse mortgage home?

The federal HECM clock decides how fast the estate must move; Michigan law decides who may sign the deed and what the closing costs look like. Under MCL 700.3711, a personal representative has the same power over title to estate property that an absolute owner would have, held in trust for creditors and others interested in the estate, and may use it without notice, hearing or court order. MCL 700.3715(1)(f) lists disposing of land at public or private sale among the transactions a personal representative may carry out, except as the will or an order in a formal proceeding restricts it.

Court approval is the exception, not the rule. MCL 700.3715(2)(a) says that when the personal representative is the state or county public administrator, the decedent’s real property may not be sold without approval of the court, and only after a hearing with notice to interested persons. When a sale does go to the court, the State Court Administrative Office’s form PC 681, Petition for Approval of Sale of Real Estate asks for the most recent assessor’s statement or tax statement showing the state equalized value and lists outstanding liens by type (mortgages, taxes and other), so the HECM payoff statement belongs in the file before the petition is drafted.

Smaller estates have a shorter path. According to Michigan Legal Help’s overview of small estate processes, the estate of someone who died in 2026 must be worth $53,000 or less to use the small estate process (the page lists $51,000 for deaths in 2025, so the limit follows the year of death), and assignment of property through the probate court is the only small estate process available when the person owned a house or land. The same page says that when real property carries a mortgage or lien, up to $264,000 may be subtracted from its value when totaling the estate, and that the value can come from tax records.

Property taxes change hands with the house. In Michigan, a home's taxable value is capped while one owner holds it. The year after it sells, that cap comes off and taxable value resets to the state equalized value, which is half of the assessor’s estimate of market value, not automatically half of what you paid. That reset is the buyer’s number after closing, or an heir’s if one keeps the house; according to Treasury, whether a given conveyance uncaps depends on whether it counts as a transfer of ownership under MCL 211.27a. The Michigan property tax calculator estimates that post-sale bill from the price and the address’s published millage.

The principal residence exemption needs its own step. Treasury’s principal residence exemption page says the exemption removes an owner’s principal residence from the local school operating millage, up to 18 mills, and carries a notice that Treasury PRE audits and denials begin April 24, 2026. Under MCL 211.7cc, an owner must rescind the claim within 90 days after the home is no longer used as a principal residence, by filing Treasury’s rescission form with the local tax collecting unit.

Sources: Michigan Department of Treasury, State Real Estate Transfer Tax; Oakland County Clerk/Register of Deeds, Fees and Forms. Other counties set their own recording procedures; check the register of deeds where the home sits.

Some sellers of a principal residence can claim an exemption from the state portion of the transfer tax when the home’s state equalized value has not risen above its level at acquisition (MCL 207.526); per Treasury, the refund claim must be filed within four years and 15 days of the sale. Whether an estate sale qualifies is a question for the closing attorney. The Michigan transfer tax calculator and seller net sheet calculator put the tax next to the HECM payoff.

How is this different from selling with a traditional mortgage?

Six things change, and the balance direction is only the first.

One neighboring situation gets conflated with this constantly. A reverse mortgage payoff is capped by the non-recourse rule. A forward mortgage in forbearance is not capped at all: forbearance pauses payments, it does not forgive them, and the full balance plus every deferred amount is due at closing. If both appear in one estate, price them separately.

What the sale nets, and what to do with it

Start from the payoff and subtract, because it is usually the largest number on the settlement statement. Selling costs come off next, and only what survives both belongs to you or the estate. Our guide to the finances of selling shows how to model it, and a seller’s net sheet is the one-page version to ask for before you list.

Taxes usually land better than people expect, though they depend on who is selling. A home sold by heirs generally takes a basis equal to fair market value on the date of death, so an estate that sells promptly often shows little gain. A living owner selling their own residence looks instead to the Section 121 exclusion of $250,000 of gain filing single or $500,000 married filing jointly, subject to the two-of-five-year ownership and use tests. Reverse mortgage advances are loan proceeds, not income. Our overview of capital gains tax exemptions covers the tests, and a tax professional should run your numbers.³

The question underneath the question is usually not “how do I sell” but “what happens next.” That is the part Align Lending works on. We are a mortgage broker, not a listing brokerage and not a law firm, so we sit on the financing side of the same transaction:

• The next purchase: Downsizing converts equity to cash with no interest clock behind it. See downsizing your home for how sellers sequence two closings.
• Bridge financing: When the estate’s calendar and the buyer’s calendar do not line up, bridge loans buy the weeks in between, priced across our lender network instead of one bank’s answer.
• One heir keeping the house: Paying off a HECM in full with a new loan in that heir’s own name is a normal financing problem with an unusual payoff attached.
• Not selling at all: If the goal is staying put, compare a reverse mortgage refinance and a conventional refinance against the sale before you list. Our guide to using home equity wisely weighs the alternatives.

What do national figures say about older homeowners who sell?

Every HECM starts with an owner aged 62 or older, the age floor the CFPB states for the program in its reverse mortgage explainer (last reviewed August 28, 2026). Ownership runs high at that stage of life: the Census Bureau reported a third-quarter 2026 homeownership rate of 79.1% for householders 65 and over, against 36.6% for householders under 35, and 69.5% in the Midwest, the highest of the four regions, in its quarterly vacancies and homeownership release of October 28, 2026.

Many of those homes were not built for later life. In a 2023 report on aging-ready homes drawn from the 2019 American Housing Survey, the Census Bureau found that about 50 million homes, or 40% of U.S. homes, had the most basic aging-ready features (a step-free entryway and a bedroom and full bathroom on the first floor), and only 6% of older households planned to renovate soon to improve accessibility. If the next home has to fit a change in health, our guide to buying a home for aging in place lists what to look for.

The buyer side matters when a seller plans to buy again. The National Association of REALTORS® reported in its 2025 Profile of Home Buyers and Sellers (published November 4, 2025, from a survey of July 2024 to June 2025 transactions) that all-cash purchases averaged 26% over the year, and noted that cash buyers may be using equity from a previous sale.

Where can heirs and older sellers get outside help?

Start with the servicer and HUD. HUD’s fact sheet for heirs tells families to contact the HECM lender immediately to review their responsibilities and options, and lists the FHA Resource Center for questions: (800) CALL FHA (225-5342) or answers@hud.gov. Per the CFPB’s answer for heirs, families can also consult a HUD-approved housing counseling agency or an attorney.

For the practical side of a move, the Administration for Community Living runs the Eldercare Locator, which takes calls and text messages at 1-800-677-1116 and connects older adults and their families to local services. According to ACL, the Area Agencies on Aging it points to coordinate services that help older adults remain in their homes if that is their preference, which is worth knowing before a family decides a sale is the only option.

FAQ: Selling a home with a reverse mortgage

Here are answers to common questions about selling a home with a reverse mortgage.

What happens to the reverse mortgage balance when I sell?

It is paid off from the sale proceeds at closing. You retain title and the right to sell at any time. Ask the servicer for a written payoff quote covering principal advanced, accrued interest, mortgage insurance premiums and servicing charges, then list normally. At closing the title company pays the reverse mortgage from proceeds and the servicer records the release. Whatever remains after payoff and selling costs belongs to you or your estate. Our guide to choosing a title company covers what to ask first.

What happens if the sale price doesn’t cover the loan balance?

Nobody owes the difference. HECMs are non-recourse: neither you nor your heirs have personal liability, and the servicer may enforce the debt only through sale of the property. When heirs settle the loan, the sale floor is a HUD-set amount capped at 95% of appraised value, and FHA insurance covers the shortfall. A below-balance sale needs the servicer’s appraisal and cooperation, so bring it in before you accept an offer, especially on an as-is sale.

What deadlines do heirs face after a due-and-payable notice?

Thirty days from the due-and-payable notice to respond, and six months before the servicer must commence foreclosure. HUD allows 90-day extensions when the estate documents that the property is actively marketed or a payoff actively pursued, and servicers commonly describe a ceiling near 12 months. Respond to the first letter immediately; extensions reward documented progress. Our explainer on when a seller gets money after closing covers what follows the sale.

Are there extra fees when selling a home with a reverse mortgage?

No penalty, but a larger payoff. Federal rules prohibit any charge or penalty for repaying a HECM in full or in part, so early payoff costs nothing extra. What makes the number big is what already accrued: compounding interest, the 0.5% annual FHA insurance premium and servicing charges, added to the balance for years. Standard seller costs apply on top. See seller’s closing costs for the rest of the stack.

Who pays property taxes and insurance on a reverse mortgage home after the borrower dies?

The estate does. HUD’s fact sheet for heirs says property taxes and insurance on the property remain the responsibility of the borrower’s estate until title is transferred, so both should stay current while the home is listed. That matches the original loan terms: the CFPB lists paying property taxes and homeowners insurance among the conditions every reverse mortgage borrower agrees to keep.

Can a spouse who is not on the reverse mortgage stay in the home?

Sometimes. According to the CFPB, what happens after the borrower dies depends on whether there are coborrowers or an eligible nonborrowing spouse. HUD says special provisions may postpone repayment and let a non-borrowing spouse remain in the property for life, but that spouse must give the lender a Non-Borrowing Spouse Certification within 30 days of the last surviving borrower’s death, among other requirements.

Is reverse mortgage interest tax deductible when the home is sold?

Generally not. IRS Publication 936 (2025) says interest accrued on a reverse mortgage, including original issue discount, is generally considered interest on home equity debt and isn’t deductible. A payoff can carry years of accrued interest, so the estate should not count on a deduction to offset it. Ask a tax professional how the rule applies to the final return or the estate’s return.

Does a reverse mortgage servicer have to file a claim in a Michigan probate estate?

Not to keep its lien. Under MCL 700.3801, a personal representative’s published notice gives creditors 4 months to present claims or be forever barred, but MCL 700.3803(3)(a) says the claim deadlines do not affect a proceeding to enforce a mortgage or other lien on estate property. The HECM stays attached to the house, so the federal due-and-payable timeline, not the creditor window, sets the pace.

The bottom line on selling a home with a reverse mortgage

A reverse mortgage is a lien, not a barrier. You keep title, you can sell whenever you choose, and federal rules let you repay a HECM in full or in part at any time without charge or penalty. If the balance has outgrown the home, non-recourse protection takes over: once the loan is due and payable, the property may be sold for a HUD-set amount capped at 95% of the appraised value, the servicer accepts the net proceeds as satisfaction, and FHA insurance absorbs the rest. Heirs get 30 days to respond to the due-and-payable notice and six months before foreclosure can begin, with 90-day extensions for documented progress. Get the payoff in writing first, and price against it.

If you’re ready to plan what the proceeds actually buy, whether that’s a smaller home, a bridge between two closings, or one heir keeping the house, talk to Align Lending. We’ll shop your scenario across our lender network and show you the numbers side by side. Call 248-506-5727 or start online. For the estate and title side, work with a Michigan real estate attorney, and browse our Selling Situations guide for the neighboring cases.

Footnotes:

1. Align Lending is not acting on behalf of or at the direction of FHA or HUD. HECM program rules, sale floors, extension practices and mortgage insurance premiums are set by HUD and change; confirm current requirements with HUD or your servicer before relying on them. Return to text.

2. Example figures here are hypothetical and educational only; they are not an advertisement of credit terms or a rate quote under federal or state lending laws. Your payoff, appraised value, allowable closing costs and net proceeds depend on your loan, your property and your servicer’s determination. Return to text.

3. This is general information, not tax advice. Basis, holding period, deductible selling costs, and eligibility for the home sale exclusion depend on your individual circumstances and on elections an estate makes. Consult a qualified tax professional about your situation. Return to text.

Figures current as of August 2026; verify with the linked source before relying on them.

Sources: prepayment in full or in part without charge or penalty at any time, regardless of any limitation stated in the mortgage, 24 CFR § 206.209. Notification to the Commissioner within 60 days for conditions under § 206.27(c)(1) or the end of a Deferral Period and within 30 days for conditions under § 206.27(c)(2); notice to the borrower, eligible non-borrowing spouse, estate and heirs within 30 days of the later of notifying the Commissioner or receiving approval; 30 days from the date of that notice for the applicable party to pay in full, sell, deliver a deed in lieu, or correct the condition; sale for an amount not less than the amount determined by the Commissioner through notice, which shall not exceed 95 percent of the appraised value, with net proceeds applied to the outstanding loan balance; closing costs not to exceed the greater of 11 percent of the sales price or a fixed dollar amount determined by the Commissioner through Federal Register notice; 24 CFR § 206.125(a). Appraisal by an FHA-roster appraiser no later than 30 days after receipt of the request, at the requesting party’s expense unless the mortgage is due and payable, in which case at the mortgagee’s expense with a right of reimbursement from sale proceeds, 24 CFR § 206.125(b). Sale for at least the lesser of the outstanding loan balance or the appraised value where the HECM is not due and payable, sale in accordance with § 206.125(a)(2)(ii) where it is, and satisfaction of the mortgage of record to facilitate the sale provided there are no junior liens and all net proceeds are paid to the mortgagee, 24 CFR § 206.125(c). Commencement of foreclosure within six months of the due date or within such additional time as may be approved by the Commissioner, 24 CFR § 206.125(d)(1). Deed in lieu of foreclosure filed for recording within 9 months of the due date, and a Commissioner-determined financial incentive where the property is deeded within 6 months, 24 CFR § 206.125(f). Borrower has no personal liability for the outstanding loan balance and the mortgagee shall enforce the debt only through sale of the property, 24 CFR § 206.27(b)(8). Due and payable on death of a borrower where the property is not the principal residence of a surviving borrower, and on conveyance of all title, 24 CFR § 206.27(c)(1); due and payable where the property ceases to be the principal residence, on failure to occupy for more than 12 consecutive months because of physical or mental illness, and on unpaid property charges, 24 CFR § 206.27(c)(2). Youngest borrower must be 62 years of age or older at closing, 24 CFR § 206.33. Servicing charge included in the Note rate between 36 and 150 basis points, or a fixed monthly charge payable from the Servicing Fee Set Aside, 24 CFR § 206.207(b). Annual mortgage insurance premium of 0.5% of the outstanding balance, U.S. Department of Housing and Urban Development. Satisfaction of the loan within 30 days of the date of the borrower’s death, lender-approved 90-day extensions with satisfactory documentation that the estate or heirs are actively trying to sell or repay, sale for at least 95 percent of the current appraised value with the lender accepting net proceeds as satisfaction, and treatment of any post-death transfer as a sale, HUD, Inheriting a Home Secured by an FHA-insured Home Equity Conversion Mortgage (9/2019). The 30-day window measured from the date of the mortgagee’s due-and-payable notice is the regulatory rule at 24 CFR § 206.125(a)(2). Heirs’ 30-day window and the six-month extension of the timeline, Consumer Financial Protection Bureau. Payoff statement within a reasonable time and in no case more than seven business days after a written request, with an express exception allowing a reasonable time where the loan is a reverse mortgage, 12 CFR § 1026.36(c)(3). Michigan Construction Lien Act, MCL 570.1101 et seq. Prohibition on communicating offers of buyer-agent compensation through an MLS and the written buyer agreement requirement, effective August 17, 2024, National Association of REALTORS®. Basis of inherited property equal to fair market value on the date of death, and the $250,000 / $500,000 home sale exclusion with the two-of-five-year ownership and use tests, IRS Publication 523.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Reverse mortgage program rules, sale floors, extension practices, insurance premiums and estate deadlines change and vary by loan, servicer and state; confirm your figures with HUD, your servicer and your payoff statement, and consult a Michigan real estate attorney and a qualified tax professional about your situation. Figures shown are illustrative, are not a rate quote or an offer of credit, and are subject to change. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.

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