When seniors across Chicago and the Illinois suburbs begin exploring reverse mortgages, one of the most important protections they want to understand is what happens when they pass away or permanently leave the home. The question I hear most often as a Reverse Mortgage Specialist is this:

“How much will my heirs have to pay if the reverse mortgage balance is higher than the home’s value”

This is where the 95 percent rule comes in, and it is one of the strongest consumer protections in the reverse mortgage program. Many seniors choose a reverse mortgage because of this rule alone.

The 95 percent rule protects your family, your home, and your estate. Today I will break it down in clear, simple language so you fully understand the benefits and the long term safeguards that come with it.

What Is the 95 Percent Rule in a Reverse Mortgage

The 95 percent rule states that when the loan becomes due, your heirs or estate can pay off the reverse mortgage by paying either the full loan balance or 95 percent of the home’s current market value, whichever number is lower.

This means your heirs never pay more than the home is worth.
Even if the loan balance is higher, they only need to pay 95 percent of market value.
The reverse mortgage is automatically considered satisfied once that payment is made.

✔ Your heirs are never forced to pay the full balance if home values decline
✔ Your estate is protected from upside down mortgages
✔ Your children cannot inherit debt from the reverse mortgage
✔ The lender must honor the 95 percent rule because it is federally regulated

This one rule ensures that your home never becomes a financial burden to your family.

Why the 95 Percent Rule Exists

The federal government designed this protection to prevent seniors or their families from being negatively affected by changes in the housing market. Home values can rise or fall. Markets can shift over time. The 95 percent rule guarantees that no matter what happens in the economy, your heirs will not be stuck with a loan they cannot afford.

It protects your family during one of the most emotional times, ensuring the house does not become a financial weight or a forced sale under pressure.

How the 95 Percent Rule Protects Your Heirs in Real Life

Let us use a real scenario from my work with Illinois seniors.

A homeowner in South Shore passed away. At the time of passing, the reverse mortgage balance was about two hundred ninety thousand. The home was worth only two hundred fifty thousand based on recent comparable sales. The family wanted to keep the home because it had been in the family for three generations.

Under the 95 percent rule, the family only needed to pay 95 percent of the home’s value, which was two hundred thirty seven thousand five hundred.

✔ The family saved over fifty thousand
✔ They were not asked to pay the full loan balance
✔ They refinanced the home and kept it in the family

This rule protected their inheritance and preserved their family legacy.

Another Example from a Chicago Reverse Mortgage Client

A Jefferson Park couple had a reverse mortgage and eventually moved into assisted living. When the home was sold, the reverse mortgage balance was higher than expected because they had drawn monthly payments for several years. Fortunately, the home’s value had increased as well, but if the value had dropped, the 95 percent rule would have prevented their children from owing any difference.

What their children told me was this:

“We felt protected. We knew we would not be stuck paying more than the home was worth.”

The peace of mind this rule provides is priceless.

A Third Example from a Bronzeville Condo Owner

A Bronzeville senior passed away leaving a condo with substantial HOA fees and repair needs. The market value of the unit decreased while he was in declining health. Because of this drop, the reverse mortgage balance ended up being much higher than the condo value.

The family did not want to keep the property.
The 95 percent rule allowed them to walk away without owing anything.

✔ They owed nothing out of pocket
✔ The home satisfied the debt
✔ FHA insurance covered the difference

This protection is one of the most powerful reasons reverse mortgages are considered safe and senior friendly.

How the 95 Percent Rule Works Step by Step

When the homeowner passes away or permanently moves out:

✔ The lender orders an appraisal to determine current market value
✔ Heirs receive a notice with the loan balance and the home value
✔ The heirs can choose to keep the home or sell it
✔ If they want to keep the home, they only need to pay 95 percent of the value
✔ If the home is worth less than the loan balance, no one pays the difference
✔ The FHA insurance fund covers any remaining shortage

Your heirs always have time to decide. The process is not rushed, and they can even request extensions if they need more time to make a decision.

Why Seniors Should Understand the 95 Percent Rule

Because it gives you confidence that your home will never become a financial burden on your family.
Because it allows you to access equity without worrying about passing debt to your children.
Because it ensures fairness and protection during the most sensitive moments of life.

This rule is one of the reasons I believe reverse mortgages are one of the strongest solutions for seniors who want to age in place with stability.

Benefits of a Reverse Mortgage for Seniors in Illinois

Reverse mortgages offer significant advantages for seniors who want to stay in their homes and strengthen their retirement.

✔ Elimination of monthly mortgage payments
✔ Ability to stay in your home long term
✔ Access to tax free funds
✔ A line of credit that grows over time
✔ Protection against market declines
✔ No loss of homeownership
✔ More financial security and peace of mind
✔ Freedom to use your equity while staying in your home
✔ Protection for heirs through the non recourse rule and the 95 percent rule

Many seniors feel more independent, less stressed, and more stable after choosing a reverse mortgage.

My Experience Helping Seniors Throughout Chicago

As a Reverse Mortgage Specialist, I have helped homeowners in Hyde Park, Bronzeville, Jefferson Park, South Shore, Beverly, Oak Lawn, Cicero, and throughout the surrounding suburbs. I have worked with retirees on fixed incomes, widows facing rising home expenses, seniors struggling with property taxes, and families looking for solutions that protect their aging parents.

What I have learned is simple.

✔ Every senior deserves accurate information
✔ Every homeowner deserves options
✔ Every family deserves protection
✔ Every reverse mortgage must be tailored to the individual

My role is not to pressure.
My role is to educate and guide you with honesty and clarity.

A Message to Illinois Seniors and Their Families

The 95 percent rule is one of the greatest protections available in financial lending. It protects your home, your equity, your heirs, and your peace of mind. When you understand this rule clearly, you can see how safe and beneficial a reverse mortgage can be when applied to the right situation.

Your home should support your retirement, not strain it.
Your equity should work for you, not sit unused while life becomes more expensive.
A reverse mortgage gives you a way to stay in your home while accessing the financial relief you earned.

Take the Next Step Toward Clarity and Confidence

If you want a personalized explanation of how the 95 percent rule applies to your home and how a reverse mortgage could improve your retirement, complete the form on the right side of this page.

I will prepare a confidential analysis that shows your estimated reverse mortgage benefit, your protections, and your long term options so you can make the best decision for yourself and your family.

Ebonie Beaco
Reverse Mortgage Specialist
NMLS 2389954