Can You Sell a Home with a Reverse Mortgage?

If you or a family member is considering taking out a reverse mortgage, there are things you will want to know--like whether you can sell your home after this type of mortgage is taken out on it. The answer is yes, but the proceeds from the sale will first go towards repaying your lender.

It is important to fully understand any loan that you may be considering. Reverse mortgages are different than the rest and can impact your assets down the road and even what you leave your children.

Here are the basics:

Reverse mortgages are usually federally backed, FHA loans. They are similar to a home equity loan, but the biggest difference is that there are no monthly payments

Essentially, the lender is willing to wait however long, 20-30 years, for the borrower to either pass away or sell their home in order to be repaid. Like a traditional mortgage, it is made by the lender, using the home as security or collateral. However, with a reverse mortgage, the loan balance is not getting smaller and it is due once you pass away or sell the home.

Compare and contrast:

• A traditional mortgage means the homeowner uses their income to pay down the debt over time.
  
  
• With a reverse mortgage, the homeowner (who must be at least 62 years old) borrows from the equity in their home, but instead of making monthly payments to a lender, a lender makes payments to them, based on a percentage of the value in your home
  
  
• The homeowner receives their loan in fixed monthly payments, lump sum, or a line of credit. No repayment of the mortgage is required until they permanently move out, sell the home, or pass away.
  
  
• There are no income or credit requirements.
  
  
• You remain the owner of your home and are on title, just like you would with any other kind of loan.
  
  
• The big drawback be that you don't leave 100% of your equity to your heirs.
  
  
• Once the home is sold, the lender is repaid and the real estate fees are paid, then any equity left in the home is what goes to you or your heirs.

If you are “house-rich and cash-poor," and need money to supplement your retirement, reverse mortgages can be an option. Keep in mind that the loan will have to be repaid, and it will impact your assets when you or your heirs go to sell the home.

Another option is to sell your home and buy something smaller in a retirement community. With the help of an experienced BHHS Verani Realty REALTOR, you can use that equity to down-size and save leftover proceeds towards retirement.