How to Sell Your Home If You Have a Reverse Mortgage

For seniors who want to continue to live in their homes during retirement, a reverse mortgage can be an attractive option. It allows seniors to access the equity they’ve built up by paying their mortgages over the years and use that money to cover living expenses.

Sometimes seniors who have taken out a reverse mortgage decide to move to be closer to their children and grandchildren. Others may need to move into a nursing home to receive full-time care. In those circumstances, a house with a reverse mortgage can be sold.

When Does It Make Sense to Sell a House With a Reverse Mortgage?
Selling your home could be a wise move if its current market value is high enough that you’d be able to pay off the loan balance and still have some money left over. If the amount of the monthly payments you’ve received, plus interest and fees, have gone up as the real estate market has suffered and your house has lost value, selling might not be profitable.

Reverse mortgages are generally non-recourse loans. That means you and your heirs will never be responsible for paying any money to the lender above the appraised value of the house. If you sell your home, the reverse mortgage lender will accept the lesser of 95 percent of the house’s appraised value or the payoff amount to close out the account.

How to Sell Your House
Before you put your home on the market, contact your lender to find out your payoff amount. That should include any money you have received, plus interest and fees. Ask the lender to provide you with the payoff amount in writing.

The next step is to list your home. Selling a house with a reverse mortgage is similar in many ways to selling a home with a standard mortgage. A real estate agent can answer your questions and guide you through the process.

What Happens When a House With a Reverse Mortgage Is Sold
When your house is sold, the money from the sale will be used first to pay off the balance owed on the mortgage, along with any liens or fees. The rest of the money will be yours to use as you see fit. You won’t incur any financial penalty by selling your house after taking out a reverse mortgage.

Should You Sell Your Home?
If you took out a reverse mortgage years ago but your circumstances have changed and you now find yourself needing or wanting to move, you may be able to sell your home and possibly walk away with a significant amount of cash to use for other expenses. Discuss your situation with your lender and a real estate agent.

This article is intended for informational purposes only and should not be construed as professional or legal advice.