Heirs pay off a reverse mortgage by getting a written quote from the servicer and either wiring the outstanding balance to keep the house or letting a sale pay the allowed amount under 24 CFR 206.125. Jay Zayer, CRMP, is a reverse mortgage specialist at reversemortgage.coach. There is no required P&I coupon for heirs to “catch up.” There is a due loan, a per-diem, and a house.
Walk through this example: Flora, 77, occupied a house in Santa Cruz, California. After her death, a son in Arizona asked whether last year’s statement was enough to refinance. No. See heirs keep the home for the keep-versus-sell split. Stay here for how the dollars actually move.
A HECM remains FHA-insured. A payoff is not a public rebate.
How do heirs get a number that an escrow can actually use?
Request a written payoff from the servicer named on the welcome letter. Ask for a good-through date and a per-diem. Interest plus 0.50% annual MIP of outstanding balance still accrue (Mortgagee Letter 2017-12). A statement balance is close. It is not the escrow figure. Do not use the origination calculator as a death quote.
Flora’s leftover cash at origination sat in the mid-30s to low-50s percent of appraised value, depending on age and expected rate. That worksheet is stale. Do not interpolate HUD rows.
Counseling cost $125–$175 at origination. Heirs do not buy a new certificate to pay the loan off. California Civil Code 1923.2(k) is not on this paper.
What funds can actually satisfy 24 CFR 206.125(a)(2)(i) to keep the house?
Cash. A new forward mortgage in the heir’s name. Estate accounts. A sibling buyout if title and the new lender allow it. HUD does not underwrite the child onto the dead parent’s HECM. If the heir cannot qualify and has no cash, keeping the house is not the path. Selling under 24 CFR 206.125(a)(2)(ii) may be.
2026 originations used the $1,249,125 cap in Mortgagee Letter 2025-22. Origination was capped at $6,000 under 24 CFR 206.31. Those origination facts do not shrink the heir payoff. Initial MIP of 2.00% of claim amount was already charged. It does not reprint as a second 2.00% to heirs.
If a LESA was funded, leftover set-aside handling follows servicing. Jay confirmed a LESA cannot be added or modified after closing. Heirs cannot invent a new LESA as a payoff patch.
A second geography: a 70-year-old in Avondale whose Arizona estate is in probate. Same federal keep price. Different court pace. 24 CFR 206.125(d) diligence does not pause for a slow docket unless HUD-approved extra time is actually granted.
How does a sale payoff differ from a keep payoff?
A keep payoff is the outstanding balance. A due-and-payable sale may close for not less than the Commissioner-set amount, which shall not exceed 95 percent of appraised value (24 CFR 206.125(a)(2)(ii)). Sale-path closing costs have a separate HUD cap inside 24 CFR 206.125(a)(2)(ii). Request the HUD path in writing. A family CMA is not that appraisal. 24 CFR 206.125(b) describes the sale-path appraisal.
An adjustable HECM still accrued at 1-month CMT plus lender margin until the payoff posts. HUD already rounded expected rate to 0.125% under 24 CFR 206.3 at Flora’s origination. Heir payoffs are a servicing wire, not the ~30-day average close I quote on a living refinance. Heir payoffs are a servicing wire, not that average.
24 CFR 206.27(b)(8) still stops a personal deficiency on an allowed sale. That protection does not reconvey title for free. See non-recourse protection.
What per-diem mistakes blow an escrow keep refinance?
An expired quote. A wire that omits the per-diem through the actual funding date. A new forward lender who underwrote last month’s statement instead of today’s figure. Flora’s son in Arizona cannot guess. Accrual of interest and 0.50% annual MIP continues through the good-through date. Title wants the letter, not a screenshot.
If the keep refinance needs the heir on title first, probate or a trust certification has to finish before the new lender will fund. HUD will not wait silently. Ask the HECM servicer what evidence of a bona fide keep refinance they need if extra time is required. Then match the wire to the quote that is still alive. A short wire does not reconvey. A 95% check does not reconvey a keep file.
Who should not shop a “95% keep” quote from a seminar?
This path does not help a household that wanted to reconvey title at 95% of a Zillow printout. Occupancy by a child does not continue the HECM. I work with multiple lenders. I will help a family read a payoff. I will turn away a 95%-as-keep plan whose only thesis is a slogan.
If the outstanding balance is near value and no heir can qualify for a forward loan, sell through the allowed path. Paying off a HECM is arithmetic. It is not a family loyalty test.
Flora’s son should put the good-through date on a calendar and fund before it dies. A keep refinance that uses a stale statement will fail in escrow. HUD will not assume him onto the HECM. Either the outstanding balance is paid, or the house is sold on the allowed path. There is no third dollar called “family appraisal.” Santa Cruz title will not reconvey on a family CMA. The keep price is the outstanding balance under 24 CFR 206.125(a)(2)(i). The sale-path ceiling is the Commissioner-set amount, which shall not exceed 95 percent of appraised value. Pick one path. Fund it.