Homeowners frequently ask, “Can I sell my home with a reverse mortgage?”
Borrowers can repay a reverse mortgage at any time without penalty. So the answer is: Yes, you can sell a home with a reverse mortgage at any time, like on a traditional mortgage.
When you sell your reverse mortgaged home, you must pay back the mortgage balance and the lender will close your loan account. You hold the remaining home equity.
Can You Sell A House With A Reverse Mortgage? How You can:
Selling your home with a reverse mortgage is virtually similar to that of selling a home with a traditional home loan. The process is as simple as following these easy steps:
Contact Your Reverse Mortgage Lender
When you decide to sell your reverse mortgage home, the first step should be to contact your lender and discuss your plan with them. Since they are experienced in the industry, they’ll walk through your best options and explain the entire process to you. Make sure you choose the best reverse mortgage lender for a smooth selling process.
According to your situation, you may have some mortgage left to repay after the home is sold. Your reverse mortgage lender will mention everything in a quote. They’ll let you know how much equity you have and how much you owe as part of liens.
Bear in mind, you’ve to repay your reverse mortgage loan, and this amount is taken out of your home equity. This means if you don’t have enough equity, you won’t be able to sell your home without repaying your mortgage another way.
When your reverse mortgage lender gives you a quote of your earnings after selling the house, you must get it in writing. Make sure the quote has an expiration date. If it takes some time to sell your property, you have to get another quote for your home equity and your final earnings at closing.
List The Home For Sale
While you can sell your home without the help of a real estate agent, doing so can be hassling and stressful. It is recommended that you hire a good real estate agent for a commission who will take care of all big and small details. A right agent is familiar with the market the home, and he may help you price your home competitively.
Before listing your home for sale, make sure it is in good condition. Make the necessary improvements so that it can attract buyers. It is when hiring a realtor can be a great idea. Instead of renovating the whole house, a realtor helps you identify the most critical areas that need your efforts so that your home can appeal to buyers.
Repay Your Reverse Mortgage
Start the selling process once a buyer makes an offer on your listed home. Once you accept the offer, your reverse mortgage lender and realtor will start with the closing process. It takes about one month or so. Revisit all the terms that your mortgage lender laid out initially.
When the sale goes through, your proceeds will have to be put towards the earnings on your reverse mortgage. From there, the equity and sale money are combined to cover the total selling price of your house.
If it covers the assessed market value of your home, the estate can be sold. Otherwise, the lender might suggest some other ways of selling a house with a reverse mortgage.
Settle Your Reverse Mortgage and Disperse The Proceeds
Once your house sells, the proceeds are distributed at closing, including the necessary amount to repay the reverse mortgage.
When you settle a reverse mortgage, you pay off:
- Principal amount you borrowed throughout the reverse mortgage
- Accrued interest on the borrowed amount
- Unpaid fees such as mortgage insurance
If your reverse mortgage balance exceeds the home’s value, then the borrower or the heirs aren’t liable to pay the difference.
The good news is a reverse mortgage is a non-recourse mortgage. You and heirs have to repay the mortgage that exceeds the appraised value or the sales price of your home.
Selling your home with a reverse mortgage: Things To Be Aware Of
Selling your home with a reverse mortgage is simple if you follow the appropriate steps.
- Follow the timeline to avoid legal complications.
- Stay in touch with your reverse mortgage lender and realtor
- Listen to your lender and follow his instructions carefully. Don’t hesitate to ask your questions about your reverse mortgage.
If the reverse mortgage debt exceeds the appraised value, the debt is reduced to 95% of the latter. This means the heirs who wish to keep the home can repay the debt for that 95% of the value.
Mortgage debt: $150,000
Home appraised value: $100,000
Then, the debt owed is reduced to $95,000.
This means your heir could buy the estate for $95,000 without repaying the entire $150,000 debt.
Hopefully, this guide answers your question: How do you sell a house with a reverse mortgage? If you still have any doubts and you plan to initiate the process, contact a reverse mortgage specialist now.