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If we leave the home we have a reverse mortgage on, will us or our children be liable for any shortfall?

By Jerry R. on 01.02.2019

Hello Jerry,

The reverse mortgage is a non-recourse loan; the lender’s only security is the property itself.  It can look to no other assets for repayment of the obligation.  I do caution all borrowers, though, that there may be additional obligations aside from the reverse mortgage you need to consider. 

I don’t know if any HOA dues, taxes, or other special assessments may be at issue, so I always encourage borrowers to do two things if they are considering leaving home.  Firstly, contact a real estate agent in your area and determine whether there is any equity in the home to be sure you are not walking away from anything to which you are entitled.  If you can sell the house and keep a little money in the process, that is your best option. 

As a second choice, if you decide you cannot sell the home, I would suggest you contact the servicer and inform them of your need to move and request if there are any incentives available for a Deed In Lieu of Foreclosure.  To avoid the drawn-out foreclosure process, if the title is clear, HUD will sometimes authorize a “cash for keys” program wherein you may be eligible to receive a payment in return for Deeding the property back to the lender to save the additional costs of foreclosure. 

It’s not much money, but if you are leaving anyway, and it eliminates the potential for further liability by removing the property from your name, it’s better for all concerned.  Remember, if the property is in your name, you or your estate are still the potentially responsible party should someone go onto the property and get injured, etc.; this would end that liability.