But there are a few pressure points: You\u2019ll need to be in close communication with your lender throughout the process to avoid triggering any legal ramifications. If it doesn’t appear that you’re actively marketing the property or miss the deadlines laid out in the agreement, you could face the possibility of foreclosure.<\/p>\n
The good news is that if you follow the rules the process can be fairly painless. We got the full rundown from an experienced reverse mortgage professional who helped us lay out the standard procedure in four simple steps.<\/p>\n When you take out a reverse mortgage, the title of the property remains in your name<\/a>\u2014in other words, you remain the owner no matter what, so you are free to sell the house<\/b>.<\/p>\n \u201cSelling a home with a reverse mortgage attached is no different than selling a home with a traditional mortgage,\u201d explains Tim Kennedy<\/a>, a mortgage loan originator and Certified Reverse Mortgage Professional with US Mortgage Corp.<\/p>\n \u201cThe lender is paid the balance of what is owed at the time of the sale, and any equity left is then paid to the homeowner or to the heirs.\u201d<\/p><\/blockquote>\n With a reverse mortgage, you\u2019re not signing your home over to the bank, you\u2019re just borrowing against the home equity<\/a> you\u2019ve built up.<\/p>\n This means that you can sell the home and repay the reverse mortgage loan at any time without paying a penalty<\/a>.<\/p>\n Unfortunately, even though you may be free to sell your home, you might not actually see any proceeds from the sale.<\/p>\n On a traditional mortgage, you\u2019re reducing your debt over time\u2014which in turn reduces the amount of interest you pay over the life of the loan\u2014until the mortgage is paid off.<\/p>\n However, with a reverse mortgage you\u2019re not paying a monthly mortgage payment. So your debt grows rather than shrinks over time. With every month that passes, interest increases your debt\u2014which means it can potentially grow beyond the amount of equity you have in the home.<\/p>\n So, unless you sell the house before your equity runs out, you won\u2019t receive any money from the sale of the house\u2014the balance of the loan plus accrued interest will go to the lender to pay back the reverse mortgage debt.<\/p>\n The good news is that most reverse mortgages are non-recourse loans<\/a>\u2014especially if you\u2019ve opted for the federally-insured home equity conversion mortgage<\/a> (HECM), which is the only reverse mortgage backed by the federal government.<\/p>\n This means that neither you or your inheriting heirs will ever be on the hook to pay the lender additional funds above and beyond the value of the house.<\/p>\n Put simply, if the house sells for less than you owe on your non-recourse reverse mortgage, you don\u2019t need to come up with cash to make up the difference.<\/p>\n And here\u2019s some even better news: if your home sells for more than you owe on your reverse mortgage, then any extra money that remains from the home sale after paying back the loan goes to you (or your heirs).<\/p>\n While you\u2019re free to sell your reverse-mortgaged home whenever you want or need to\u2014there are some scenarios where you\u2019ll have<\/i> to sell.<\/p>\n These scenarios\u2014which trigger your reverse mortgage coming due\u2014are known as maturity events<\/a>:<\/p>\n On the plus side, using up all of your home equity is not<\/b> a maturity event.<\/p>\n This means that even if your reverse mortgage exceeds the available equity before you move out or pass away, you can remain in your home indefinitely without making mortgage payments\u2014as long as it remains your primary residence.<\/p>\n However, you will still need to maintain the property and pay housing expenses including property taxes and HOA fees, or you will trigger a maturity event and be required to pay back the reverse mortgage or sell the house.<\/p>\n The steps to selling a house with a reverse mortgage are really no different than if you were selling a home with a traditional mortgage.<\/p>\n Since selling the home is a maturity event, that essentially takes care of step one.<\/p>\n Depending on the lender, either the date that you list the house for sale or the date you accept an offer will be considered the date of the maturity event.<\/p>\n However, it\u2019s wise to contact your loan servicer when you decide to sell so you can confirm the loan amount you\u2019ll need to repay. It\u2019s also a wise idea to notify them asap because the list date or offer date are not always the date of the maturity event<\/b>.<\/p>\n If you\u2019re selling because the borrower has passed away or is no longer residing in the home, then it\u2019s the date that the home was last occupied by the borrower, or the date of death of the last surviving spouse.<\/p>\n Why does the date of the maturity event matter? Check out step two.<\/p>\n The exact date of the maturity event matters because you need to notify the loan servicer<\/a> of the reverse mortgage within 30 days of the maturity event<\/a>.<\/p>\n Once your loan servicer receives this notification, they\u2019ll send out a \u201cdue and payable\u201d letter.<\/p>\n Having sent the \u201cdue and payable\u201d letter, the loan servicer will then send out an FHA-approved appraiser<\/a> to assess the current market of the property.<\/p>\n The amount that’s due to the lender will either be the total debt amount of the reverse mortgage loan or 95% of its current appraised value<\/a> if the debt amount exceeds the current value.<\/p>\n Whichever amount is lower is the amount due.<\/p>\n After you the borrower (or your estate) receive the \u201cdue and payable\u201d letter, you then have 30 days from the date of the letter to respond. If you fail to respond to this letter, your reverse mortgage lender can proceed to foreclose on the home<\/a>.<\/p>\n After you respond, you move on to step three.<\/p>\n Technically, repayment of the reverse mortgage is due immediately when a maturity event is triggered<\/a>, say when the borrower sells the house, moves into an assisted care facility, or passes away.<\/p>\n However, depending on the lender and the terms of the loan, you\u2019ll likely have up to six months to repay the reverse mortgage loan<\/a>.<\/p>\n \u201cThe estate has six months to sell the property, with two optional three-month extensions,\u201d explains Kennedy.<\/p>\n \u201cIt\u2019s very important to keep the loan servicer advised of the process and demonstrate that the home is being actively marketed or financing is being actively pursued to avoid any legal ramifications.\u201d<\/p>\n Don\u2019t forget that the main legal ramification is foreclosure\u2014which takes the home sale process out of your hands.<\/p>\n So if you need more time, be sure to make your extension request well in advance, and ask for written verification of the extension approvals from your loan servicer.<\/p>\n Just like with a traditional mortgage, once the home sells the proceeds will be distributed at closing\u2014with the necessary funds going toward paying off the reverse mortgage.<\/p>\n When you settle the reverse mortgage loan, you are paying off:<\/p>\n \u201cIf the balance of the reverse mortgage exceeds the value of the home then the homeowner or the heirs are not responsible to pay this difference, explains Kennedy.<\/p>\n \u201cThe good news is a reverse mortgage is a non-recourse loan. Therefore, neither the homeowner nor the estate heirs are responsible for paying back any portion of the loan that has exceeded the appraised value or the sales price.\u201d<\/p>\n If the proceeds from the sale exceed the debt amount owed on the reverse mortgage, then any remaining money (equity) is distributed to the home seller or the estate heirs.<\/p>\n Selling a house with a reverse mortgage may seem complicated, but it\u2019s actually rather simple\u2014as long as you follow the appropriate steps.<\/p>\n \u201cFollowing the prescribed timeline is vital in order to avoid any legal complications and to keep the lines of communication with the loan servicer open,\u201d advises Kennedy.<\/p>\n \u201cIt\u2019s important that you communicate any questions about your reverse mortgage. The loan servicer will always help you through the end of the loan process, so make sure to keep their telephone number or email address someplace convenient.\u201d<\/p>\n One other mistake that inheriting heirs could make is if they pay too much to keep the property.<\/p>\n Remember that if the reverse mortgage debt exceeds the appraisal amount, then the debt is reduced to 95% of the appraised value. This means that an inheriting heir who wishes to hold onto the home can pay off the debt for that 95% of the value.<\/p>\n In simpler terms, if the mortgage debt stands at $150,000 but the home appraises for $100,000, then the debt owed is reduced to $95,000\u2014which means the inheriting heir could purchase the home for $95,000 without needing to pay off the entire $150,000 debt.<\/p>\n The complex process it takes to obtain a reverse mortgage\u2014and the loan type\u2019s less than stellar reputation\u2014can make selling a home that has one seem like a daunting undertaking.<\/p>\n But if follow the appropriate steps and seek the advice of a certified reverse mortgage professional<\/a>, you\u2019ll be able to navigate the process seamlessly. The whole experience will be even easier if you work with an experienced real estate agent<\/a> who has reverse mortgage experience, such as a seniors real estate specialist<\/a>.<\/p>\n Header Image Source: (fizkes\/ Shutterstock)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Selling a house with a reverse mortgage is much like a traditional home sale, but there are a few pressure points to be aware of. <\/p>\n","protected":false},"author":37,"featured_media":9867,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[343,322],"tags":[],"class_list":["post-9864","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finances","category-logistics"],"acf":[],"yoast_head":"\n![\"\"](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/03\/selling-a-house-with-a-reverse-mortgage-bank.jpg\")
<\/a>Non-recourse reverse mortgages protect you from owing more than your home is worth<\/h2>\n
When you have to sell a house because of a reverse mortgage<\/h2>\n
![\"selling](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/03\/image1-1-775x597.png\")
<\/a>![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/03\/selling-a-house-with-a-reverse-mortgage-steps.jpg\")
<\/a>4 steps to selling a house with a reverse mortgage<\/h2>\n
Step 1: Trigger a maturity event<\/h3>\n
Step 2: Contact your loan servicer<\/h3>\n
Step 3: Establish a repayment plan<\/h3>\n
Step 4: Settle the loan and disperse the proceeds<\/h3>\n
\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/03\/selling-a-house-with-a-reverse-mortgage-communicate.jpg\")
<\/a>Selling a house with a reverse mortgage? Watch out for these pitfalls<\/h2>\n
The bottom line on selling your house with a reverse mortgage<\/h3>\n