If you have a traditional mortgage, selling your home with professional help is relatively easy. However, the process is a bit more complicated for homeowners with reverse mortgages. Also, keep in mind that you may not get top dollar for your property, depending on the market conditions in your area.
Selling a home with a reverse mortgage can be done, though, by following the proper steps.
Reverse Mortgage Basics
A reverse mortgage is a type of home loan available to individuals 62 or older. It allows you to convert your home equity into cash. But unlike traditional home equity loan products, you won’t make loan payments.
Instead, you’ll receive the funds in a lump-sum payment, in monthly installments or through a line of credit. And they aren’t payable until you sell your home, pass away, relocate or fail to maintain the upkeep of the property.
If you are interested in getting a reverse mortgage for someone over 62 years old, consider the full-service mortgage lender Top Flite Financial. A reverse mortgage can help you during your retirement to get the money you need to finance healthcare, mortgage payments or any other ventures while keeping ownership of your home.
To qualify, the house owner must be 62 years old or older and have a sizeable amount of equity in the home. The Home Equity Conversion Mortgages (HECM) that Top Financial offers are backed by the federal government, fully guaranteed and allow a non-borrowing spouse under 62 to be on title and retain all rights to the property if their spouse were to pass before them.
Complete the online form on this page to request a free consultation with a Top Flite reverse mortgage expert with no obligation.
Can You Sell a House with a Reverse Mortgage?
As mentioned above, selling a house with a reverse mortgage is possible. But you’ll be on the hook for the outstanding balance plus any interest accrued over time and applicable fees.
If your home is worth far more than it was when you took out the reverse mortgage, you can turn a profit when selling the house even after repaying the balance. That said, a decline in the appraised value could mean you’ll walk away with nothing. This is because the lender will use whatever proceeds are received from the sale of the home and collect mortgage insurance to recoup what they’re owed.
Heirs who receive a home with a reverse mortgage could also be forced to sell to repay what’s owed. If you had a government-backed Home Equity Conversion Mortgage (HECM), your heirs wouldn’t have to come out of pocket even if the house sells for less than what you owe. However, this rule may not apply with private mortgage reverse mortgage lenders and could put your heirs at risk of having to pay an excessive amount to the lender.
Steps to Sell a House with a Reverse Mortgage
Here’s how to move forward if you have a reverse mortgage on your home and are ready to sell.
Contact the Lender
You should start the process by contacting your lender or loan servicing company. They can tell you how much you owe and the fees you’ll incur at closing when selling your home. If possible, get this information in writing to avoid confusion or surprises after you find the perfect buyer and it’s time to seal the deal.
Consult a Realtor/Real Estate Agent
Unless you plan to sell the home on your own, you’ll need to hire a real estate agent to assist. (It’s in your best interest to do so since research shows you’re more likely to get top dollar for your home with professional help. Plus, a knowledgeable real estate agent can deal with any hiccups that may arise to help make the sales process go as smoothly as possible on your end). They will pull comps, or real estate comparables, to determine how much you can potentially earn on the sale of your home. Based on these figures, you’ll know if the sales proceeds are sufficient to pay off the reverse mortgage balance and if you’ll potentially pocket a portion of earnings.
Get an Appraisal
Comps are a great first step toward understanding your property value. However, you’ll also need an appraisal before listing your home for sale. Nevertheless, it gives you a concrete idea of what your home is worth so you can list it accordingly while keeping the reverse mortgage loan balance in mind.
List Home for Sale
Your real estate agent will handle this step for you. First, however, you’ll likely need to prepare the home for listing, which could include tidying up and decluttering to ensure it shines in the photographs that will be included in the listing.
Close and Settle Up
Once the home sells and the closing is complete, the final step is to confirm your account is settled. It generally involves your lender applying the sales proceeds to the reverse mortgage balance and disbursing any remaining funds to you (if applicable).
What to Consider Before Selling a House with a Reverse Mortgage
Keep these considerations in mind if you’re planning to sell a house with a reverse mortgage soon.
The Timing of the Sale
It’s sensible to wait until you’ve had your reverse mortgage for some time before selling. Otherwise, the fees you incur could far outweigh the sales proceeds.
The Amount You Get
Will you turn a profit on the sale? This only happens if you sell for less than what’s owed on the reverse mortgage (including accrued interest and fees).
What Happens to the Proceeds
The lender receives the sales proceeds. If any funds remain after the loan is paid off, they are sent to you.
Repaying the Reverse Mortgage
You won’t pay a penalty by selling a home with a reverse mortgage. However, the balance has to be repaid to the lender.
Maturity Events
A maturity event requires that the reverse mortgage be repaid. It occurs if the borrower sells the home, passes away, fails to maintain it, or relocates to another property or assisted living facility.
When to Sell a House with a Reverse Mortgage
Selling a home with a reverse mortgage could be sensible if:
- Your home has appreciated in value.
- You’d prefer to relocate to an assisted living facility.
- You cannot afford maintenance costs, insurance and property taxes on the home.
- You want a smaller, more affordable property that’s easier to maintain.
- You want to use the sale proceeds to eliminate other debt.
- You’re looking to relocate to a different city or state.
However, you should probably hold off and explore other options if:
- You have minimal equity in your home.
- Your home has depreciated, and selling will result in a loss.
- You want your heirs to inherit the property when you pass away.
- You prefer to remain in your home for some time.
Are There Alternatives to Selling the House?
Are you having second thoughts about selling a house with a reverse mortgage? If so, here are some viable alternatives to explore:
- Consult with agencies in your area offering assistance to seniors. You could be eligible for discounted or free support services to help cover living expenses and remain in your home. Some also know of senior-specific programs that provide home improvement loans to help make your home more efficient and possibly reduce maintenance costs.
- Request assistance from relatives. If you have family members who can relocate to your home, they could help tremendously with the property upkeep and other expenses. They can also chip in on the mortgage to soften the financial burden you’re currently experiencing and help give you much-needed relief.
- Stay in your home. It could be best to stay put if you won’t turn a profit by selling your home. Remember, there’s no pressure to repay what you owe on a reverse mortgage unless a maturity event occurs.
- Hire in-home support. Perhaps finances aren’t an issue, but you may be considering relocating to an assisted living facility. But if you’d prefer to stay in your home, you can hire in-home support to get the assistance you need.
- Consider a deed in lieu of foreclosure. Did a maturity even occur, prompting the repayment of the reverse mortgage? If selling your home isn’t an option, consider offering the deed to the lender. That way, you can walk away without having to deal with foreclosure proceedings.
