Yes. You, or your estate after you die, can sell a house with a reverse mortgage at any time. The loan is paid off from the sale at closing, and whatever is left belongs to you or your heirs. On a HECM, the FHA-insured kind most borrowers have, there’s no prepayment penalty, and if the loan is bigger than the house is worth, a sale for at least 95% of the appraised value settles it. The heirs owe nothing more.
Two things families still get wrong
Can you sell your house if you have a reverse mortgage?
Yes. You still own the house, so you can sell it whenever you choose (CFPB). The servicer gives your attorney a payoff, the loan is paid from the sale, and you keep the rest. Federal rules let you pay off a HECM in full at any time without a penalty (24 CFR 206.209).
Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), insured by the FHA (CFPB). This guide covers HECM rules. A private, or “proprietary,” reverse mortgage follows its own contract, so read it or ask the servicer.
Pay the lower New Jersey transfer fee if you qualify
If you’re 62 or older, a New Jersey resident, and you own and live in the one- or two-family house when you sell, you pay a reduced Realty Transfer Fee, claimed on Form RTF-1 with the deed. On a $400,000 sale, that’s $1,495 instead of $3,215. A married couple or civil union partners who own the house as tenants by the entirety qualify if one of them does (Form RTF-1). If you’ve already moved out, ask your attorney whether you still meet the “owned and occupied” test.
Moving into assisted living or a nursing home
If a borrower lives elsewhere for more than 12 months in a row because of physical or mental illness, and no other borrower lives in the house, the servicer can call the loan due with HUD’s approval (24 CFR 206.27). Selling on your own timeline, before that happens, leaves you more choices than selling against a due-and-payable notice.
A spouse who isn’t on the loan
Whether a spouse who isn’t a borrower can stay depends on when the loan was made. For HECMs with FHA case numbers assigned on or after August 4, 2014, an Eligible Non-Borrowing Spouse who was married to the borrower when the loan was signed, was named in the loan documents and still lives there as a primary residence can stay after the borrower dies (CFPB). Check this with the servicer before anyone lists the house.
When does a reverse mortgage come due, and how long do heirs have?
The loan comes due when the last borrower dies (unless an eligible non-borrowing spouse can stay) or sells. With HUD’s approval, it can also be called due when no borrower lives there anymore or taxes or insurance go unpaid. After a death, the servicer must start foreclosure within 6 months unless HUD approves more time. You have 30 days from the due-and-payable notice to tell the servicer your plan, and HUD can add up to two 90-day extensions while you’re actively selling. Here is the clock.
- 1Tell the servicerRight away
Call the number on the loan statement. Ask for the payoff and the due-and-payable notice in writing.
- 2The due-and-payable noticeFirst month
The servicer notifies the estate or heirs and lists the options: pay off the loan, sell for at least 95% of the appraised value, or sign a deed in lieu of foreclosure (HUD ML 2015-10).
- 3Your answer30 days from the notice
Tell the servicer in writing which option you’re taking (24 CFR 206.125).
- 4The appraisalWithin 30 days
The servicer orders an FHA appraisal. While the loan is due, the servicer pays for it and can be repaid from the sale.
- 5Sell or pay offBy month 6
Foreclosure must start within 6 months of the death unless HUD approves more time.
- 6Ask for extensionsUp to 2 × 90 days
With proof you’re actively marketing the house or arranging a payoff, the servicer can ask HUD for up to two 90-day extensions.
- 7If nothing happens: foreclosureAfter the deadline
New Jersey foreclosures go through the courts (NJ Courts). You can still sell until the sheriff’s sale, but the balance keeps growing.
What are the heirs’ options for a house with a reverse mortgage, and what does each net?
On a $400,000 house with a $230,000 reverse mortgage balance, listing it nets the estate about $18,350 more than a cash sale in this example, and it takes 2 to 5 months longer. Signing a deed in lieu nets $0. Keeping the house means paying off the loan. Here it is line by line.
| List as-is | Cash buyer | Deed in lieu | |
|---|---|---|---|
| Sale price (est.) | $400,000 | $350,000 | House goes to the servicer |
| Commission (est. 5%) | $20,000 | $0 | $0 |
| Loan payoff at closing (est.; $230,000 growing 7.5% a year) | $237,278 (5 mo) | $231,438 (1 mo) | Loan settled |
| Taxes, insurance, utilities while you wait (est. $1,100/mo) | $5,500 | $1,100 | Until the deed |
| Realty Transfer Fee (exact; estates pay the standard rate) | $3,215 | $2,105 | — |
| Your attorney (est.) | $1,500 | $1,200 | — |
| Time to close (est.) | 3 to 6 months | 1 to 4 weeks | Set by the servicer |
| Net to the estate | $132,507 | $114,157 | $0 |
Every figure marked (est.) is an assumption for this example. The 7.5% growth rate stands in for your loan’s interest rate plus the 0.5% insurance premium; your loan statement shows the real rate. The transfer fee is the state’s standard schedule, because estates can’t claim the senior rate.
Net to the estate
Time to close vs. the HUD clock
1–4 wk
3–6 mo
6 mo
up to 12 mo
- Listing nets the most when there’s equity and the house shows well. Every month adds interest and insurance to the payoff, so price it to sell inside HUD’s six months.
- A cash buyer nets less but closes in weeks, stops the balance from growing and spares the estate repairs, showings and extension requests.
- A deed in lieu hands the house to the servicer and settles the loan, and the estate gives up any equity. It makes sense only when there’s no equity and no buyer at 95%. On HECMs with FHA case numbers assigned on or after September 19, 2017, HUD reimburses the servicer for up to $3,000 in “cash for keys” when the deed comes within 6 months of the due date, so ask (HUD ML 2017-11).
- Keeping the house means paying the lesser of the full balance or 95% of the appraised value, usually with a new loan in the heir’s name (CFPB).
What if the reverse mortgage is more than the house is worth?
The 95% rule applies. When a HECM is due, the borrower, an eligible non-borrowing spouse, the estate or the heirs can sell the house for at least 95% of its appraised value (HUD ML 2017-11), and the lender accepts the proceeds as payment in full (HUD). FHA insurance covers the rest, and no one owes the difference.
A $360,000 balance on a house appraised at $320,000
$304,000, paid to the servicer at closing
$56,000 the heirs never pay
- Heirs can keep the house the same way. They pay the lesser of the balance or 95% of the appraised value.
- A transfer to the heirs counts. HUD treats any transfer after the death as a “sale” for the 95% rule (HUD).
- The floor applies to every buyer, including us. When the loan is bigger than the house, an offer below 95% of the appraised value won’t settle it.
- No New Jersey estimated tax. When all the proceeds go to the lender and the seller receives nothing, the seller claims that exemption on Form GIT/REP-3 (TB-57).
What does New Jersey add to a reverse mortgage sale?
Five New Jersey steps can slow a reverse-mortgage sale if nobody plans for them: proving who can sign, the inheritance tax waiver, the transfer fee, the GIT/REP form and, if deadlines pass, a foreclosure that runs through the courts.
Who can signAn executor or administrator with Letters from the county Surrogate. A living owner who can’t sign: an agent or a court-authorized guardian.
Tax waiverIf every heir is Class A, file Form L-9. If anyone else inherits, the estate files a full inheritance tax return first.
Transfer feeThe seller pays. Estates pay the standard rate; a qualifying owner 62 or older pays less.
GIT/REP formResidents and resident estates file GIT/REP-3. Nonresidents usually prepay estimated tax.
Court foreclosureIf deadlines pass, the case goes to court. You can still sell before the sheriff’s sale.
The estate needs authority before it can sign
For an estate, the deed is usually signed by the executor named in the will, or by an administrator appointed when there’s no will. Both get their authority from the county Surrogate, as Letters Testamentary or Letters of Administration. If the owner is alive but can’t sign, an agent under a durable power of attorney may be able to; without one, a court-appointed guardian needs the court’s authorization to sell the house (Stewart Title NJ). Our guide to selling an inherited house in New Jersey walks through probate.
Clear the inheritance tax lien early
New Jersey’s inheritance tax is a lien on the house until a tax waiver releases it, so the closing needs one. When every beneficiary is Class A, such as a spouse, child, grandchild or parent, the executor files Form L-9. If anyone else inherits, the estate files a full inheritance tax return first (Division of Taxation). Start it the week you call the servicer, not the week of closing.
The transfer fee and the GIT/REP form
The seller pays New Jersey’s Realty Transfer Fee when the deed records. The reduced senior rate is a personal exemption that estates and trusts can’t claim (Division of Taxation). At closing, a resident seller signs GIT/REP-3, and an executor of a resident estate gives the county clerk proof of residency. A nonresident seller generally prepays estimated tax on GIT/REP-1, at least 2% of the price (TB-57). For the full fee schedule, see our guide to the costs of selling in New Jersey.
How do you sell a house with a reverse mortgage in New Jersey, step by step?
For heirs, a reverse-mortgage sale runs about ten steps against HUD’s six-month clock. A cash sale skips the listing and the buyer’s mortgage and usually closes in 1 to 4 weeks once the estate can sign. The time estimates are typical ranges, not guarantees.
- 1Call the servicerWeek 1
Report the death, ask for the payoff and the due-and-payable notice in writing, and keep every letter.
- 2Get authority to signWeeks 1 to 4
Probate the will or apply for administration with the county Surrogate.
- 3Send your planWithin 30 days of the notice
Tell the servicer in writing: sell, pay off or deed in lieu.
- 4Get the appraisalWithin 30 days
Learn your 95% floor before you set a price.
- 5Protect the houseUntil closing
Keep taxes, insurance and utilities current and the house secured; the estate stays responsible until title transfers (HUD).
- 6Choose the routeWeeks 2 to 6
Get a written price from an agent and one cash offer. Compare the nets on the closing dates.
- 7List and show itMonths 1 to 4Cash sale skips this
Price it to sell inside HUD’s window.
- 8Sign the contract, then attorney review3 business days
When an agent prepares the contract, either attorney can cancel during review.
- 9Ask for extensionsBefore month 6Cash sale usually skips this
Send the servicer your listing or contract so it can ask HUD for more time.
- 10Waiver, GIT/REP and closing1 day
The servicer is paid off at closing, and everything above the payoff goes to the estate.
How do you keep a reverse-mortgage sale on track?
Most delays come from paperwork, not buyers. Have these eight things in hand before you sign a contract.
Ask every buyer the same three questions: What’s the estate’s net after the payoff? What can change it before closing? Can you close before the HUD deadline? A buyer who answers all three in writing is safe to compare against a listing.
Frequently asked questions
Can you sell a house with a reverse mortgage?
Yes. The owner, or the estate after a death, can sell at any time. The loan is paid off from the sale at closing, a HECM has no prepayment penalty, and any money left belongs to the owner or the heirs.
What happens to a reverse mortgage when the owner dies?
If no other borrower or eligible non-borrowing spouse lives there, the loan comes due. The servicer sends the estate or heirs a due-and-payable notice, and they have 30 days to choose: pay off the loan, sell for at least 95% of the appraised value, or hand the house over with a deed in lieu.
How long do heirs have to sell a house with a reverse mortgage?
The servicer must start foreclosure within 6 months of the death unless HUD approves more time. Heirs who are actively selling can get up to two 90-day extensions, so up to about 12 months in all. Answer the due-and-payable notice within 30 days either way.
Do heirs have to pay back a reverse mortgage?
Only to keep the house. To keep it, heirs pay the lesser of the full balance or 95% of the appraised value. If the house is sold instead, a HECM is settled from the sale, and the heirs don’t personally owe any shortfall.
What is the 95% rule for reverse mortgages?
When a HECM is due, the house can be sold for at least 95% of its appraised value and the lender accepts the proceeds as payment in full, even if the balance is higher. FHA mortgage insurance covers the difference.
Can I sell a house with a reverse mortgage to a cash buyer?
Yes. If the house is worth more than the loan, any price that covers the payoff works, and the estate keeps the rest. If the loan is bigger than the house, the price has to be at least 95% of the appraised value, whoever the buyer is.
Who orders the appraisal on a reverse mortgage after the owner dies?
The servicer orders it from an FHA-approved appraiser. While the loan is due and payable, the servicer pays for it and can be reimbursed from the sale.
What is a deed in lieu on a reverse mortgage?
It means signing the house over to the servicer to settle the loan instead of going through foreclosure. The heirs owe nothing more but give up any equity. On newer HECMs, HUD reimburses servicers for up to $3,000 in cash for keys when the deed comes within 6 months of the due date.
Does moving to a nursing home make a reverse mortgage due?
It can. If a borrower lives in a care facility for more than 12 months in a row and no other borrower lives in the house, the servicer can call the loan due with HUD’s approval.
Can my spouse stay in the house if they’re not on the reverse mortgage?
Possibly. On HECMs with FHA case numbers assigned on or after August 4, 2014, an Eligible Non-Borrowing Spouse who was married to the borrower when the loan was signed, was named in the loan documents and still lives there can stay after the borrower dies.
Who pays the transfer tax when you sell a house with a reverse mortgage in New Jersey?
The seller pays the Realty Transfer Fee. An owner who is 62 or older and owns and lives in the one- or two-family house may pay the reduced rate on Form RTF-1. An estate pays the standard rate.
Do you need probate to sell a house with a reverse mortgage in New Jersey?
Usually. The executor or administrator needs Letters from the county Surrogate to sign the deed, and the estate needs a New Jersey inheritance tax waiver to release the state’s tax lien before closing.
Does the reverse mortgage balance keep growing after the owner dies?
Yes. Interest and the annual FHA mortgage insurance premium keep being added until the loan is paid off, which is why delays cost the estate equity.
Sources
- CFPB: If I take out a reverse mortgage loan, does the lender own my home?
- CFPB: Can my heirs keep or sell my home after I die?
- CFPB: What happens to my reverse mortgage when I die? (spouses, care facilities)
- CFPB: How much does a reverse mortgage loan cost?
- HUD: Inheriting a home secured by an FHA-insured HECM
- HUD Mortgagee Letter 2015-10: HECM due and payable policies
- HUD Mortgagee Letter 2017-11: the 95% sale amount and cash for keys
- 24 CFR 206.125: acquisition and sale of the property
- 24 CFR 206.27: when a HECM becomes due and payable
- 24 CFR 206.209: prepayment without penalty
- NJ Division of Taxation: Realty Transfer Fee rate schedules
- NJ Division of Taxation: Realty Transfer Fee FAQ (estates and trusts)
- NJ Division of Taxation: Form RTF-1, Affidavit of Consideration for Use by Seller
- NJ Division of Taxation: General Guide to Being an Executor
- NJ Division of Taxation: TB-57(R), real estate seller forms (Rev. 06/26)
- New Jersey Courts: Foreclosure self-help
- Stewart Title NJ: conservatorships and guardianships
This guide is general information about selling a house with a reverse mortgage in New Jersey as of November 14, 2026. It covers FHA-insured HECMs. It is not legal or tax advice. For your sale, talk to a New Jersey real estate attorney, your loan servicer and a HUD-approved housing counselor.