Yes you can – but it’s a little different than selling a home with a traditional forward mortgage, so here are some important things to know.
There are many reasons you might decide to sell your home after getting a Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage. Sometimes life changes, and the home you thought was going to be permanent doesn’t fit your needs anymore. Someday you may want or need to move closer to family, into a senior community, or an assisted-living facility. With a reverse mortgage, you own your home and it’s yours to sell whenever you wish.
The great advantage of a reverse mortgage is that as long as you live in the home, there are no monthly mortgage payments required1. But it’s important to remember that if you do sell the home and move out, the reverse mortgage becomes due and has to be repaid.
Here’s what to expect if you sell a home with a reverse mortgage.
The proceeds from the sale must first go toward paying off your reverse mortgage – so it’s important to understand how much you owe and how much you can expect to get from the sale. There’s no penalty for paying off a reverse mortgage early.
- If your home appreciates in value, and the sale will more than pay for what you owe on the reverse mortgage, any money that’s left over goes to you.
- If your home has lost value, due to market factors or other reasons, the sale may not be enough to cover the entire loan balance, plus any interest and fees that may apply.
The good news is that a reverse mortgage is a type of loan known as “non-recourse”. This simply means that you cannot owe more than your home is worth at the time of its sale. In a case where the home sale doesn’t cover the loan, the lender would get the proceeds from the sale of your home, and mortgage insurance would pay the rest. This protection applies to your heirs, as well.
You can find more information about repaying a reverse mortgage here.
Important steps to follow when selling your reverse mortgage home:
- Find out how much you owe. Get in touch with your reverse mortgage lender as soon as possible to discover exactly how much you owe – remember, this includes the loan balance, plus any interest and fees that apply. Ask for a detailed payoff quote in writing.
- Get an appraisal on your home. This will tell you the fair market value of your property, and how much you might expect to get from the sale. Compare this to the reverse mortgage payoff quote to determine whether you’ll have enough proceeds from the sale to cover the payoff figure. Learn more about the appraisal process here.
- Consider hiring a realtor or a real estate lawyer. Hiring professionals will come at a cost, which will reduce any profit you may get from the sale of your home. But the expertise they bring, especially if the realtor has experience in selling homes with reverse mortgages, could make the process easier and help ensure that there are no snags along the way.
- List the home for sale. Preparing the home to sell, taking pictures, choosing the right listing price, and marketing the sale is a lot of work – so this is where a realtor can help you sell the home faster and get the best offer. They can also provide insight on which repairs/upgrades are worth making, and which aren’t necessary to sell it for a good price.
- Close the sale and pay off the loan. The money you receive from the sale must first go to pay off your reverse mortgage. Be sure to contact your lender to confirm that you are paid off and your account has been closed. If there are any additional funds left over, they’re yours to use in any way you wish.
If you have other options, is selling your home the right one?
Selling your home is a major decision—and in some cases, such as health reasons, there may be no other choice. But if it’s not an absolute necessity, here are some things to consider before you decide to sell a reverse mortgage home:
- If you sell within a few years of getting your reverse mortgage, it’s possible that you may have used up a portion of your home equity without getting much in return. Could it wait until you’ve built up more equity?
- If you sell your home after its value has decreased, you’ll get less for it—meaning you’ll get a smaller profit once you’ve paid off the reverse mortgage. Could you wait until market value trends are in your favor?
- If you’re selling because the home no longer meets your needs, could you use proceeds from the reverse mortgage to renovate or upgrade it and avoid having to move?
Alternatives to selling your reverse mortgage home:
Stay where you are. With a reverse mortgage, you own your home and can stay in it as long as you like.
Find help through government programs. The responsibilities of a reverse mortgage homeowner are to pay property taxes and homeowners insurance, and for home maintenance. If you ever find that you can no longer afford it, some city and state governments offer property-tax help or low-cost home improvement loans for seniors.
Get the care you need to age in place. With the increase in the older-adult population, there are more and more services available that provide in-home care—and you can use the proceeds from your reverse mortgage to pay for them. You could also check with your local Agency on Aging to see if they have low-or-no-cost services available.
Get family members to help. Perhaps you just need a little help to remain living in your home. Can a family member provide what you need? Or rather than selling your house and moving closer to them, could they move in with you?
We hope this has helped answer your question about selling a home with a reverse mortgage.
At Longbridge Financial, reverse mortgages are all we do – we’re an industry-leading lender, and our loan officers are experts who can answer any other questions you may have about reverse mortgages. We’re also one of the few reverse mortgage lenders who also service loans, so we can provide responsive service throughout the life of your loan.
To learn more about a reverse mortgage, fill out the form on this page to get a free info kit, or call Longbridge at 855-523-4326. There’s no cost and no obligation.
1Property taxes, homeowners insurance, and home maintenance required.