Selling your home may seem like the thing to do, but is it the best choice for you, and what do you need to know when you have a reverse mortgage? Let's find out…
Can I Sell a Home with a Reverse Mortgage?
Much like a traditional mortgage, if you have a reverse mortgage, the simple answer is—yes, you can sell your home. Here are five things you need to know:
- Any time: You can sell your home at any point.
- Without penalty: Selling your home with a reverse mortgage does not come with any penalty.
- Loan balance: At the close of the sale of the home, the balance of the reverse mortgage must be paid off.
- Close account: The account will be closed once your reverse mortgage balance is paid off.
- Keep excess proceeds: After the reverse mortgage balance is paid off, any extra funds and equity are yours to keep.
8 Steps to Selling a Home with a Reverse Mortgage
- Get a payoff quote: Contact the reverse mortgage lender and request a written quote for how much you owe, and what funds are needed to pay off your reverse mortgage.
- Payoff quote expiration: Once you have a payoff quote from your lender, make note of when it expires. If it takes longer than its expiration date, then you may need more than the expected funds to pay off your reverse mortgage loan.
- Home market value: Find out what is your home worth in today's market. Here's how to find out.
- Listing price: Determine what price you want to list your home for. Payoff quote + your home's current home market value will give you a starting price point.
- Decide how the home will be sold: Will you be using a real estate agent or selling it yourself? Keep in mind that a real estate agent will have a commission of about 6% of the overall sale. This needs to be taken into account when calculating the amount you will receive from a sale and the amount needed to pay off the reverse mortgage.
- List the home for sale: Put up a for sale sign, take photographs, and prepare your home to show to potential buyers.
- Hire a real estate attorney: This will give you the security of knowing the payment and closing of your reverse mortgage is taken care of properly.
- Complete the sale of the home: When an offer comes in that you're willing to accept, complete the sale process.
Next, we'll discuss what you need to know if what you owe on your reverse mortgage is greater than your home's current market value.
Don't Worry About Other Assets
Has the value of your home gone down and is the balance of your reverse mortgage greater than what you can sell it for? The reverse mortgage on your home is a non-recourse loan. This means that you do not need to worry about your other assets when selling your home. The lender cannot touch any other assets you may have.
If selling your home won't pay off the balance of your reverse mortgage, but it does cover the market value of the home, than all the proceeds of the sale go to the lender. You do not receive any funds, and any balance still owed to the lender is their loss, not yours.
If selling your home will not cover the current market value of your home or your outstanding reverse mortgage balance, the lender may choose to foreclose on the home instead.
If foreclosure may be a possibility, or if you may not receive any proceeds from selling your home, perhaps you should consider the reason behind your motivation to sell.
4 Reasons for Selling a Home with a Reverse Mortgage
When evaluating your reasons for selling your home with a reverse mortgage, it's important to think if any of your plans for the future involve being away from your home for a time period greater than 12 months. If you reside outside of your home with a reverse mortgage for 12 months or longer, your balance will go into repayment on a reverse mortgage.
- Wanting a different home: Keeping your credit intact and undamaged is important if you want to purchase a new home.
- Wanting to travel: How long to do plan on traveling for?
- Moving in with relatives: Is this a short-term or long-term move?
- Moving into a nursing home: Will you be staying at a nursing home for less than a year?
Is Selling a Home with a Reverse Mortgage Right for You?
When deciding to sell your home when you have a reverse mortgage, there is a major question to consider—why are you selling your home?
If you are selling and you will receive funds from the sale after paying off the reverse mortgage, it may be the financially right choice for you and your family.
If you will not be able to receive any funds from the sale, because you owe more than you are able to sell your home for, then selling it may not be financially the best choice for you and your family.
Here's more info on reverse mortgages :