Can You Sell Your House with a Reverse Mortgage?
If you’re concerned about having the funds to support a comfortable retirement, a reverse mortgage loan can provide an additional source of funds for financial peace of mind. And with home values soaring, they’re increasing in popularity — the number of reverse mortgages issued in 2021 rose 29% from the prior year.
A reverse mortgage works by leveraging the equity you’ve built up in your home over the years, without selling your home or †taking on a new mortgage payment. But what if you do decide to sell your home after obtaining a reverse mortgage? The good news is you can.
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Truth be sold
You can sell your home with a reverse mortgage at any time. When you do, your reverse mortgage becomes due and payable.
During the life of the loan, interest and the annual mortgage insurance premium (MIP) accrue on the outstanding loan balance. This is due when the when the loan is repaid.
If your home’s value has appreciated, you can typically sell it for more than what you owe and keep the difference. But what if its value has declined? A reverse mortgage is what’s known as a non-recourse loan, so you won’t owe more than your home is worth at the time of repayment. If the sales price matches the appraised value, the proceeds go to the lender, and mortgage insurance covers the difference.
An heir’s rights
When a reverse mortgage loan holder passes away, the loan must be repaid. Interest on the balance, as well as monthly insurance premiums, will continue to accrue until the loan is settled.
If your heirs are actively working to sell the property, they’re entitled to request two ninety-day extensions beyond the initial six-month grace period to satisfy the loan. Keep in mind that extensions are not guaranteed, and they require specific documentation.
Considering a sale?
Here are some questions to ask yourself before selling a home with a reverse mortgage:
Do you have another place to live? While a reverse mortgage can offer you a valuable source of funds while aging in place, your circumstances may change, and you’ll have to put your long-term needs first in deciding where to live.
Did your home’s value depreciate? In this case, you may walk away from the sale with less money in your pocket. If you’re not on a strict timeline, you may consider waiting until the market is more in your favor.
How long have you had the mortgage? Just like any other mortgage product, there were fees when you obtained the loan. In addition to an origination fee and closing costs, there’s also an upfront MIP payment, as well as a fee for reverse mortgage counseling by an independent, third-party counselor. While there’s no penalty for selling, think about how much you’ve already spent and if it’s financially sensible to sell at this time.
Making the “right” move
With the facts in hand, you can decide if listing your home with a reverse mortgage is a smart move for you and your family. Contact the loan specialists to learn more about your options. Call us today.
This content is sponsored by RMF, one of the nation’s leading reverse mortgage lenders.