For one reason or another, you’re thinking about selling your home. Perhaps the cost of maintenance is to high, the space itself is just too big for your needs, or maybe you’ve got your eye on another property.
However, things change when you’ve taken out a reverse mortgage on your house. Now that it’s time to sell, you might be wondering how that will affect the sale of your home. It could affect it in a number of ways, depending on the terms of your specific reverse mortgage loan.
Before you list your house as for sale, you should know what to expect, how to sell your house after getting a reverse mortgage, and if you’ll be able to walk away with any profit from the sale of your home.
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Can I Sell My Home With a Reverse Mortgage?
Yes you can sell your home at any time with a reverse mortgage. Having a reverse mortgage doesn’t mean that you don’t own your home. Your house is still very much under your ownership, but there is also a lien against your home from your reverse mortgage lender. That means the lien holder is entitled to payment before you. As such, it is your right to sell your home if you want to, but you must take care of the lien and pay back any funds you’ve received from your reverse mortgage as part of the process.
How to Sell a House With a Reverse Mortgage
Contact the Reverse Mortgage Lender
When you initially make the decision to sell your home, you should contact your lender and talk to them about it. They can walk through your options with you and explain exactly how the process will work. Depending on your specific situation, you may have some mortgage left to pay off after you sell the house. Your lender will lay all of this out for you in a quote. They will let you know how much equity you have and how much you owe as part of any liens, as well as what that will leave you with after the sale of your home.
Remember, you do have to pay back your reverse mortgage loan, so that amount will be taken out of your total equity. This means, if you don’t have enough equity leftover to repay the loan, you won’t be able to sell your home without paying it back another way. When they give you a quote for your earnings after you sell the home, make sure that you get it in writing and that it has an expiration date as well. Quotes usually become void after a certain period of time, so if it takes you awhile to sell your home, you might need to get another quote for the value of your home and your final earnings at closing.
List the Home for Sale
Listing your home for sale is the exact same process you would be involved in if your home wasn’t connected to a reverse mortgage. Just follow the standard procedure of hiring a real estate agent, if that’s what you’d normally do, and list your home as for sale to the public. Make sure that it is tour ready and is in good selling condition. Of course, before the sale of the house an inspector will do that as well, but you know your house well and should know if there are any serious repairs that need to be done before it’s ready to sell.
Complete the Sale and Repay Your Reverse Mortgage
After your house has been listed and someone makes an offer on it, you’ll start the selling process. You’ll accept their offer and proceed accordingly. Your real estate agent and mortgage team will initiate closing, which normally takes about 30 days or so. Be prepared for what closing will look like for you with a reverse mortgage. Your mortgage representative should have laid out the terms clearly at the start, but now is a good time to revisit them.
When your sale goes through, your proceeds will need to be put towards what you owe on your reverse mortgage. From there, the sale money and equity will be combined to try and cover the total appraised value/selling price of the home. If it does cover what the housing market assesses to be the total value of the home, then your home can be sold. If it will not cover the cost of the home, your lender might let you know about some other possible routes that you can take.
What If I Owe More Than My Home Is Worth?
If your loan was large enough, you may not be able to repay the full cost of the loan with your excess equity. If that’s the case, your have to pay whatever you can with the remaining equity that you have and your mortgage lender may ask you to pay the remainder of your loan via some other means. However, as long as your sale and equity cover the market value of your home, you don’t have to stress about your other assets. Your home will be sold regardless — this is what is called a non-recourse loan, which we will discuss below.
Yet, if your sale and equity do not cover the total value of your home, the mortgage company may agree that they feel it isn’t the best course of action and they may advise you against it. The choice is up to you, but if you choose to sell your home and can cover little to no remaining costs, the bank will likely choose to foreclose on the home instead of allowing you to sell it.
Non-recourse loan simply means that a lender cannot seize any additional assets from you if you cannot cover the cost of your reverse mortgage. If your sale covers the market value of the home, but not necessarily the rest of your reverse mortgage on top of that, the lender will take on that burden instead of you. They cannot ask you to sell or surrender any other property to cover the remainder and they will not attempt to capture any assets from you either.
The bottom line is, if your not going to gain anything from the sale of your home, it might be a good idea to rethink your strategy. If you can wait a few more years to pay off more of your loan and/or your mortgage, it might make sense to do so. Otherwise, the bank could decide that it’s in their best interest to seize the home as a foreclosure instead of allowing you to sell it. However, if you’ve met with your lender and their estimates leave you with a profit after you sell, that is a much better scenario to be in. If you feel that it’s time to move on from your home and use the proceeds for retirement, travelling, or maybe even purchasing a new home, selling your home just might be able to accommodate those needs.
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