When I pass away, will my heirs be responsible for the repayment of the HECM loan?
The HECM is a non-recourse loan, therefore the home is the only asset the lender can pursue to repay the loan balance. The heirs, or the estate, will only need to pay back the HECM loan if they choose to retain ownership of the home. They can do so by refinancing into their own name or purchasing the home for 95% of the value at the time the last borrower passes away. If they wish to sell the home, they can do that as well. Any remaining proceeds from the sale of the home, after paying the HECM balance, will go to the estate. If the heirs choose to refuse ownership, then the servicer will foreclose on behalf of the lender to seek restitution for the loan balance. However, this will not reflect negatively on any of the heirs’ credit.