How to get out of a reverse mortgage

A reverse mortgage can provide financial relief for homeowners who want to tap into their home’s equity without monthly payments—but it isn’t always the right long-term fit. Whether your needs have changed, costs feel too high, or you’d like to leave more equity to your heirs, you may be wondering how to get out of a reverse mortgage. 

The good news is that there are several options available. In this post, we’ll walk through the most common ways to exit a reverse mortgage and what to consider before making your decision.

Reverse mortgages: A brief overview 

A reverse mortgage is a financial option available to qualifying homeowners aged 62 or older. This type of loan can provide a lump sum payout, a line of credit, or monthly payouts, which can be used for any purpose — such as tackling home repairs, paying off debt, or boosting your savings. 

Since reverse mortgages allow homeowners to stay in their homes and receive supplemental income, they’re a rather appealing solution. Plus, there are no monthly payments. Instead, the debt is repaid when the borrower passes away, sells the home, or moves. 

There are three types of reverse mortgages, with home equity conversion mortgages (HECMs) being the most common.

However, reverse mortgages also come with serious drawbacks: fees and interest can be high, the loan balance grows over time, and it reduces the amount of equity you can leave to heirs.

For many homeowners, these trade-offs make it important to weigh short-term financial relief against long-term costs.

How to get out of a reverse mortgage

If you’ve decided a reverse mortgage no longer fits your needs, you’re not stuck. Homeowners have several options to exit a reverse mortgage, each with its own benefits and considerations. The right path will depend on your financial situation, future plans, and how much equity you still have in your home. 

Below, we’ll walk through the most common ways to get out of a reverse mortgage.

Use your right of rescission

The Truth in Lending Act (TILA) allows individuals a grace period to change their minds about a loan or financing. In this case, it gives you three days to cancel your agreement — even if you’ve already talked to a reverse mortgage or HUD-approved housing counselor and paid closing costs. 

If you are within this three-day window, you need to notify your lender in writing. The Consumer Financial Protection Bureau recommends that you send your letter by certified mail and ask for a return receipt to ensure you’ve documented that you cancelled the loan within the allotted time.

Once your lender receives your notice, they have 20 days to return any money you’ve paid towards your reverse mortgage loan, including fees.

Pay off your reverse mortgage

If you’re outside the grace period, the most straightforward solution is to pay off your reverse mortgage. To do this, consider withdrawing a portion of your retirement funds to pay off the loan or ask for financial help from family members to assist with repayment. 

You could also use a different form of home equity financing to pay off your reverse mortgage — assuming you have enough equity to pay off the balance. These include a home equity loan, a home equity line of credit (HELOC), or a home equity investment (HEI). The benefit of an HEI is that, like a reverse mortgage, you don’t have to make monthly payments.

Refinance into a conventional loan

Another way to exit a reverse mortgage is by refinancing into a conventional mortgage. In this case, you take out a new traditional loan and use it to pay off the reverse mortgage balance. This option can help reduce fees, secure a lower interest rate, and provide a more straightforward repayment structure.

The primary difference is that with a conventional mortgage, you are required to make monthly payments, unlike a reverse mortgage. If you can cash flow these monthly payments and still retire comfortably, it could be worth considering — though you will still have to pay closing costs to restructure your loan.

Refinance the reverse mortgage

If your biggest concern with a reverse mortgage is the interest rate or loan terms, refinancing may be the solution. Many homeowners choose to refinance into a new reverse mortgage with better terms—such as a lower interest rate or reduced fees—while others use refinancing to add a spouse to the loan or unlock additional equity. 

The downside to this is that you’ll have to pay closing costs again, which can be expensive. Additionally, your reverse mortgage loan balance will grow because you won’t make monthly payments.

Sell your home

Selling your home is an additional way to the settle the debt — assuming you’re ready to move or downsize. When you do, the proceeds from the sale of your home can be used to pay off the reverse mortgage loan. If you have profits left over after the sale and after paying off the reverse mortgage, you can keep the difference.

This is a practical choice for homeowners who want to downsize to a home with less maintenance or need to move into a nursing home for health reasons.

Frequently asked questions

Is it possible to pay off a reverse mortgage early?

Yes, homeowners do have the option to pay off their reverse mortgages early. Fortunately, these loans do not carry prepayment penalties, giving you the flexibility to settle the balance early if your finances allow.

Can I sell my house with a reverse mortgage on it?

Yes, you can sell your home with a reverse mortgage lien—just as you would with a property that carries a home equity loan or HELOC.  When the sale closes, the proceeds are first used to pay off the loan amount, and any remaining funds are yours to keep.

What happens if I want to move?

To qualify for a reverse mortgage, your home must remain your primary residence. If you decide to move and it’s no longer your main home, the full balance of your reverse mortgage becomes due.

Can family members pay off a reverse mortgage to keep the home?

Yes, family members can pay off a reverse mortgage if they want to keep the home in the family. To do this, they must pay the full loan balance, which includes the amount borrowed plus any accrued interest and fees. Once the reverse mortgage is fully repaid, the home is free of the lien, and ownership can be transferred or retained by the family.

What happens if the loan balance is more than the home is worth?

Reverse mortgages are typically non-recourse loans, which means you—or your heirs—won’t owe more than the home’s value when it’s sold. If the loan balance exceeds the market value, the lender absorbs the difference. Your family cannot be held responsible for paying the remaining balance, making this type of loan a way to access home equity without risking additional personal debt.

Final thoughts

Exiting a reverse mortgage doesn’t have to be complicated, but it does require understanding your options and planning carefully. Whether you choose to refinance, sell your home, pay off the loan, or involve family members, each path has its own benefits and considerations.

The first step is to understand your rights as a borrower or eligible non-borrowing spouse, including the ability to cancel the loan within three days of closing. 

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