How to get out of a reverse mortgage

If you're wondering how to get out of a reverse mortgage, you have clear options based on your timing and goals. Within 3 business days, you can cancel the loan. After that, you can sell, refinance, or pay off the balance. We’ll also cover foreclosure avoidance steps and what happens to spouses and heirs.

Key takeaways:

• Options for getting out of a reverse mortgage include exercising your right of rescission within 3 business days, selling your home, paying off the loan balance, or refinancing.
• Family members can retain an inherited property by paying off the balance or 95% of its appraised fair market value, whichever is less — a provision known as the 95% rule.
• Standard home equity conversion mortgages (HECMs) are nonrecourse loans, meaning neither you nor your heirs will ever owe more than the home's market value.

Can you get out of a reverse mortgage?

Yes, you can get out of a reverse mortgage. Depending on how recently you signed your paperwork and what your long-term goals are, you can cancel the loan outright, pay off the balance with personal funds, sell the home, or refinance into a traditional mortgage.

Exiting a loan may carry fees or require new monthly payments. Speaking with a HUD-approved housing counselor can help you clarify your choices so you can move forward with confidence.

How a reverse mortgage works

A reverse mortgage lets qualifying older homeowners convert a portion of their home equity into cash without selling the property or making monthly mortgage payments. Instead of paying down your loan balance each month, the lender pays you, and the balance grows over time as interest accumulates.

Funds can be paid out as a lump sum, regular installments, a line of credit, or a combination of these options. If you're deciding between loan types, weigh a reverse mortgage vs. home equity loan before moving forward.¹

To maintain the loan, you must satisfy basic reverse mortgage requirements, including paying ongoing property taxes, homeowners insurance premiums, and any HOA fees, as well as keeping the home in good repair.

What is a HECM?

The most common type of reverse mortgage is a home equity conversion mortgage (HECM), which is insured by the Federal Housing Administration (FHA).² Other reverse mortgage types include proprietary reverse mortgages for higher-value homes and single-purpose reverse mortgages for specific expenses like home repairs or property taxes.

To qualify for an HECM, you must be at least 62 years old and either own your home free and clear or have significant equity.

Because HECMs are government-regulated, borrowers have to complete a financial assessment before they’re approved to ensure they can afford ongoing property obligations.

Rocket Mortgage doesn't offer reverse mortgages but knows it's important for borrowers to understand all their borrowing options.

When does a reverse mortgage need to be paid back?

Unlike traditional home loans, reverse mortgages don't require monthly principal and interest payments. However, the balance eventually becomes due when specific events occur:

• The home is no longer used as the borrower's primary residence. This occurs if you move to an assisted living facility for more than 12 consecutive months without a co-borrower or spouse living in the home.
• The property is sold or the title of ownership is transferred.
• The borrower fails to follow loan requirements, such as paying property taxes, maintaining insurance, or keeping up with maintenance.
• The last surviving borrower dies.

How do you pay back a reverse mortgage?

The standard way to repay a reverse mortgage is by selling the home. Sale proceeds pay off the loan balance, with the remaining equity going directly to you or your estate. You also can pay off the balance using personal savings or by refinancing into a traditional mortgage.

What heirs can do after the borrower dies

When the borrower dies, the heirs or estate must decide what to do with the property and the loan. Understanding who is responsible for a mortgage after the borrower dies can help you decide your next move. Heirs typically have several options:

• Keep the home. Refinance the reverse mortgage balance into a traditional home loan.
• Pay off the loan at a discount. Retire the debt by paying the lesser of the full loan balance or 95% of the home's appraised fair market value.
• Sell the property. Sell the home, settle the loan, and keep any remaining proceeds.
• Deed in lieu of foreclosure. Sign the title over to the lender to release the estate from responsibility.

Reasons for exiting a reverse mortgage

Some homeowners run into reverse mortgage problems, while others simply want a change. Common reasons to exit include:

• You need to move into an assisted living facility or nursing home.
• You experience buyer's remorse soon after closing.
• Ongoing property taxes, insurance, and maintenance costs exceed your budget.
• You want to leave the home to your heirs without requiring them to buy it.
• A nonborrowing spouse or relative living with you would face housing instability if you pass away or move.
• You no longer need the income from the reverse mortgage.

5 ways to get out of a reverse mortgage

Here are five common ways you can get out of a reverse mortgage.

1. If you just signed the loan, use your right of rescission

If you signed your reverse mortgage papers within the last 3 business days, federal law grants you a “right of rescission” to cancel without penalty. To exercise this right, notify your lender in writing via certified mail with a return receipt requested. Once invoked, all closing costs and unused loan funds will be returned within 20 days. This is often called your right to cancel.

2. Sell the house

Selling your home is a common exit path. Proceeds from the sale cover your loan balance, and you get to keep any remaining funds. If you also carry a separate home equity loan, review what happens to your home equity loan if you sell your house before listing the property. If your home sells for less than the total loan balance, you won't owe the difference. HECMs feature nonrecourse protection backed by FHA insurance, covering any shortfall.

3. Pay off the reverse mortgage

You can pay off your reverse mortgage balance, including accrued interest and fees, using personal savings or liquid assets. Unlike breaking a fixed-rate mortgage, paying off a reverse mortgage early typically doesn't trigger prepayment penalties. Some lenders will also accept partial payments if you can't pay the full balance right away.

4. Refinance into a new reverse mortgage

If you want to keep a reverse mortgage structure but need better terms, you can refinance your existing reverse mortgage into a new one. This can help you secure a lower interest rate, switch from an adjustable to a fixed rate, or access more equity if your home's value has increased.³ Note that refinancing involves standard closing costs.

5. Refinance into a regular mortgage

If your financial situation allows you to resume monthly mortgage payments, you can replace your reverse mortgage with a conventional mortgage. You'll need to qualify based on income and credit, but this strategy lets you rebuild equity over time and simplify inheritance plans. Some lenders also offer refinance programs for seniors that can ease the qualification process, and if you have a separate HELOC, know that you can refinance a HELOC using similar steps. If you're reviewing how to get out of a mortgage arrangement that no longer fits your financial situation, refinancing into standard loan terms is a solid step.

What to do if you’re facing reverse mortgage foreclosure

Falling behind on property taxes or insurance can trigger default, but you have clear steps to avoid reverse mortgage foreclosure.

Communicate with your lender

Reach out to your loan servicer immediately if you receive default notices. Depending on the situation, lenders may try to establish repayment plans or temporary extensions instead of foreclosing.

Talk with a HUD-approved counselor

HUD-approved housing counselors offer free guidance to help you review your rights and resolve loan issues.

Review your long-term plans and costs

Evaluate your monthly budget. If ongoing maintenance and tax obligations aren't sustainable, exploring housing transitions or alternatives to a reverse mortgage can help maintain your long-term financial stability.

Submit a complaint

If your lender fails to follow program guidelines, refuses reasonable workout options, or you suspect a reverse mortgage scam, you can submit a complaint to the Consumer Financial Protection Bureau (CFPB) or your state attorney general.

What happens to co-borrowers, spouses, and heirs?

Here are the options for co-borrowers, spouses, and heirs if you’re unable to continue living in a home that has a reverse mortgage.

If your spouse or another resident is a co-borrower

If your spouse or co-resident is listed as a co-borrower on the loan, they’ll still have the right to stay in the home and receive loan benefits even after you move out or pass away.

If your spouse or another resident is not a co-borrower

If a spouse or relative living in the home isn't a co-borrower, their status determines what happens next. Eligible nonborrowing spouses may qualify for FHA protections that allow them to defer loan repayment and stay in the home as long as they pay property taxes and insurance. Other nonborrowing residents — each considered a non-co-borrower — generally must repay the loan balance or move out when the borrower leaves the home.

If you inherit a house with a reverse mortgage

When you inherit a house with a reverse mortgage, you aren't personally responsible for the debt. You can choose to pay off the balance, refinance into a traditional home loan, sell the property and retain remaining equity, or sign the title over to the lender. If you're refinancing to keep the property in just your name, learn how to remove a name from a mortgage during that process.

FAQ

Here are answers to common questions about how to get out of a reverse mortgage.

Is it difficult to get out of a reverse mortgage?

Getting out of a reverse mortgage is pretty straightforward as long as you have a clear plan to settle the balance, such as selling the home, refinancing, or using cash savings.

What is the 95% rule on a reverse mortgage?

The 95% rule allows heirs to settle a HECM balance by paying 95% of the home's current appraised market value, even if the loan balance is higher than the home's value.

What happens if you can’t pay back a reverse mortgage?

If you can't repay the loan when it becomes due, the lender will start the foreclosure process to sell the home and settle the balance. Because HECMs are nonrecourse loans, the lender can’t pursue your other assets or your heirs for unpaid balances.

Can you walk away from a reverse mortgage?

Yes, you can walk away from a reverse mortgage by executing a deed in lieu of foreclosure, transferring ownership to the lender to satisfy the loan without selling the property yourself.

Are there reverse mortgage loopholes?

There aren’t any secret loopholes, but federal guidelines provide valuable options like the 3-day right of rescission, nonrecourse limits, and the 95% payoff rule.

The bottom line: How to get out of a reverse mortgage

Exiting a reverse mortgage comes down to timing, your budget, and your housing goals. With plenty of options available, you shouldn’t feel trapped if it turns out that the arrangement no longer works for you. You have clear choices to take control of your home equity, so move forward with confidence.

If you're ready to explore home financing options to transition into your next chapter, apply with Rocket Mortgage today.

¹ Home Equity Loan Product is a second standalone lien and may not be used for piggyback transactions. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Not available on Ameriprise products. Additional restrictions, terms, and conditions apply. Must meet qualification requirements. This is not a commitment to lend.

² Rocket Mortgage is not acting on behalf of FHA or HUD.

Refinancing may increase finance charges over the life of the loan.

Rocket Mortgage is a trademark or service mark of Rocket Mortgage LLC or its affiliates.

This article is for informational purposes only and is not intended to provide, and should not be relied on for, medical, legal, financial, or tax advice. You should consult with a qualified professional for advice specific to your situation. Consumers should independently verify that any services, products, or programs referenced meet their needs and comply with applicable requirements.