Selling a Home with a Reverse Mortgage, Tricks and Tips
The popularity of reverse mortgages is on the rise. Many homeowners are turning to this type of home loan to supplement their retirement income, pay off debt, or finance home repairs. But what happens when it's time to sell your home with a reverse mortgage in place? In this blog, I'll provide you with tips and tricks to help you navigate the process of selling your home with a HECM loan.
First and foremost, if you're considering selling your home with a reverse mortgage, it's important to know that you will have to pay back the money borrowed plus interest and selling fees. This means that the loan balance will be due upon the sale of your home. There are a few different scenarios that can play out depending on your loan balance and the sale price of your home.
If your loan balance is less than the amount you sell your home for, you get to keep the difference. For example, if you owe $200,000 on your reverse mortgage and you sell your home for $450,000, you would keep the remaining $250,000 after paying back the loan balance minus any costs to sell like realtor and Title fees.
If your loan balance is more than the amount you sell your home for, and you sell your home for the appraised value, the money from the sale will go towards the outstanding loan balance, and any remaining balance of the loan will be paid for by mortgage insurance. You nor your heirs are responsible for the deficiency.
Now, what happens if your reverse mortgage loan is in default? If you've received a notice that the loan is "due and payable," you may be able to sell your home for 95 percent of its appraised value. The money from the sale will then go towards the outstanding loan balance, and any remaining balance of the loan will be paid for by mortgage insurance.
It's also important to note that the process of selling a home with a reverse mortgage is slightly different from a traditional home sale. You'll need to work closely with your lender to ensure that the loan is paid off in full. It's a good idea to start this process as early as possible to ensure that everything is in order for a smooth sale.
One final tip for selling your home with a reverse mortgage is to work with a real estate agent who has experience in this area. A knowledgeable agent can help guide you through the process and ensure that everything is taken care of. They can also help you set a realistic asking price and market your home to potential buyers. I can help refer you to this agent when you are ready.
Selling a home with a reverse mortgage can seem daunting, but it doesn't have to be. By familiarizing yourself with the process and working closely with your lender and a knowledgeable real estate agent, you can ensure a successful sale. Remember to pay back the loan balance in full, and if your loan is in default, you may be able to sell your home for 95 percent of its appraised value. With these tips and tricks in mind, you'll be well on your way to a successful home sale.
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.