Exploring Options When Selling a Home with a Reverse Mortgage

Reverse mortgages provide a unique opportunity to tap into your home equity without selling your property. Instead of making monthly payments, the lender pays you. However, it's important to remember that a reverse mortgage is a loan that comes with interest and fees. To be eligible for a reverse mortgage, you must be at least 62 years old, among other criteria.

But what happens if you decide to sell your home with a reverse mortgage? Whether you want to move for medical reasons or pass away, it's essential to understand the process. Here are some key takeaways:

You can sell a home with a reverse mortgage, and you'll need to repay the loan.

If you sell for at least the balance due on the reverse mortgage, you can pocket any excess funds.

If you sell for the home's market value but owe more on the reverse mortgage, mortgage insurance will cover the remaining balance.

If you're in default on the loan, you may sell the home for 95% of the appraised value, and mortgage insurance will cover the shortfall.

<strong>Can You Sell a House With a Reverse Mortgage?</strong>

Yes, you can sell a home with a reverse mortgage. There are different types of reverse mortgages available, such as Home Equity Conversion Mortgages (HECMs) and proprietary reverse mortgage loans. Both options require mortgage insurance, and this insurance plays a role when you sell a home with a reverse mortgage.

<strong>What Happens When You Sell a Home With a Reverse Mortgage?</strong>

If you voluntarily sell your home, the loan is considered fully paid when you repay at least the loan balance. Any excess funds belong to you. If you sell for the home's appraised market value but owe more on the reverse mortgage, mortgage insurance covers the remaining balance. Remember, payments from a reverse mortgage are not considered income, so you don't need to pay taxes on them.

<strong>Selling in Default or Foreclosure</strong>

To maintain your reverse mortgage, you must meet specific requirements, such as living in the home, paying property taxes and insurance on time, and keeping your property in good condition. If you default on the loan, you may sell the home for 95% of the appraised value or the loan amount. The sale proceeds go towards paying off the loan balance, with mortgage insurance covering any remaining amount.

Dealing with a Reverse Mortgage After the Borrower's Death

Once the borrower passes away, the fate of the reverse mortgage depends on several factors. If there was a co-borrower, they may continue living in the home if they meet certain conditions. If there was no co-borrower, the loan must be repaid, either through selling the home or other means. Heirs can sell the property and use the proceeds to settle the reverse mortgage balance.

When Must You Sell a Home With a Reverse Mortgage?

Reverse mortgage lenders have strict requirements, including the borrower's age, primary residence status, property condition, and timely payment of taxes and insurance. Failure to meet these conditions may result in the forced sale of your home. It's essential to communicate with your lender if you can't fulfill these requirements to explore possible solutions.

Remember, a reverse mortgage is a financial tool that must be managed carefully. Understanding your options when selling a home with a reverse mortgage is crucial for making informed decisions.