For many that obtain a reverse mortgage, the plan is to stay and age at home, but sometimes reasons come up that the homeowner will want or need to sell the home. Is this possible if there is a reverse mortgage on the home? And what does it look like?
Can a home with a reverse mortgage be sold?
Yes, the home can still be sold at any time, just like with a traditional mortgage. When the home is sold, the borrower will repay the loan balance and any outstanding closing fees from the proceeds of the sale. Any additional funds from equity will be theirs to keep.
Are there penalties?
No, there are no penalties when selling a home that has a reverse mortgage loan on it.
How are the funds from the sale dispersed?
When the home is sold, repayment of the reverse mortgage loan will be first, followed by any outstanding liens or other obligations, then the homeowner will keep any additional proceeds.
Do I have to notify the reverse mortgage lender of my intent to sell?
Not necessarily, but it is a good idea to start there and find out what the outstanding balance is. Having all the facts upfront will help with decision making all around.
Bottom line: Selling a home that has a reverse mortgage loan against it is very similar to selling a home that does not have a reverse mortgage. As long as you are aware of the few differences, it is a smooth process.
Reverse mortgages are available to seniors 62 and over as long as the home the loan is being used against is the primary residence and there is some equity available. The funds are accessible to the borrower in a variety of ways including monthly installments, line of credit, lump sum, and even a tool to purchase a new home.
Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington. Contact Janis and learn if reverse mortgage is right for you.