Just like with a traditional mortgage, reverse mortgage borrowers are free to sell their home whenever they like. Of course, they will need to repay the loan as outlined in the terms of their loan agreement.
A reverse mortgage can be a powerful retirement tool that allows seniors over 62 who want to age in place the ability to access some of their home equity. Contrary to some misconceptions, you own your home, not your reverse mortgage lender. So, the decision to sell your home is entirely in your hands.
What to Know When Selling a House with a Reverse Mortgage
The process for selling a home with a reverse mortgage is typically like selling any other home. You’ll meet with a realtor, set your price, and show the home to prospective buyers. If your home sells for more than you owe on your reverse mortgage, the profit is yours to keep.
If you’re going to sell your home with a reverse mortgage, here are five things to put on your to-do list:
- Let your lender know you’ll be selling. Just like when you’re about to pay off any other type of large debt, your lender will send an official payoff quote letting you know the amount needed to pay off the reverse mortgage with all interest and fees included.
- Get your home appraised. An appraisal will be required if the amount you owe on your home is higher than the estimated value. But, it’s always a good idea to get a professional opinion of a home’s value before listing it.
- Hire a real estate attorney. A real estate attorney can help you navigate the selling process, making sure you’ve done everything correctly.
- List your home for sale. Depending on the market timing, selling your home can take up to several months. A realtor may ask you to make updates or changes, hold open houses and show the home to potential buyers or exit the home while buyers are looking.
- Close on your home sale. The closing is the same as when selling any other home. In this case, the proceeds of the sale will go toward paying off your reverse mortgage. If there are funds left over, they are yours to keep. For HECM loans the timeline is mandated by the U.S. Department of Housing and Urban Development (HUD). You have 90 days to notify the loan servicer and provide the listing agreement if you plan to sell the home. It’s possible to receive three-month extensions, up to 12 months, but they must be requested and approved by HUD.
FAQs About Selling a Home With a Reverse Mortgage
Q. Are there penalties for selling a home with a reverse mortgage?
A. No. you are not penalized or assessed any fees for selling.
Q. If I have a maturity event and know that my home is not valued more than what I owe on the reverse mortgage, can I just walk away from the home?
A. You may be able to walk away by offering the lender the deed in lieu of foreclosure. You should talk with your lender to see if this is an option, and you should also get an appraisal since your home may be worth more than what you think.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.