If a homeowner reaches the end of a reverse mortgage term and there’s no remaining equity, they still have some options — but they’ll need to move quickly since the loan becomes due. Here’s what they can consider:

1. Sell the Home (Even if It’s “Underwater”)

• If the home is worth less than the loan balance, a reverse mortgage is non-recourse — meaning the lender can only be repaid from the home’s value, not other assets.

• They can list the property for sale, and the lender will accept the proceeds as full payment, even if that’s less than the loan amount.

• This can protect the borrower’s estate from additional debt.

2. Sign a Deed in Lieu of Foreclosure

• If selling isn’t feasible, the homeowner can voluntarily transfer the home back to the lender to satisfy the debt.

• This avoids a formal foreclosure process, which can be less stressful and less damaging to heirs.

3. Refinance (If Possible)

• Rare, but if the borrower (or their heirs) can qualify for a traditional mortgage, they could refinance to pay off the reverse mortgage and keep the home.

• This usually requires proof of income, creditworthiness, and an appraisal that supports the new loan.

4. Heirs Purchase the Home at 95% of Market Value

• FHA-insured reverse mortgages (HECMs) allow heirs to buy the home for the lesser of:

  • The full loan balance, or

  • 95% of the home’s current appraised value.

• This can be useful if the family wants to keep the property despite the lack of equity.

5. Walk Away and Let Foreclosure Proceed

• While not ideal, the homeowner (or heirs) can simply not take action, and the lender will foreclose.

• Because it’s non-recourse, the lender cannot pursue other assets for repayment.

💡 Tip for Southeast Texas homeowners: In this market, even if you think there’s no equity, it’s worth getting a current market analysis before making decisions. Property values have been fluctuating, and you may have more equity than you realize — which could give you more flexibility.