Over the past decade, many homeowners in the United States, particularly seniors, have become familiar with a popular form of financial loan that entitles them to remain in their home while also collecting on the needed funds to ensure their continued quality of life. Known as a reverse mortgage loan, the transaction is also sometimes referred to as a home equity conversion mortgage. However, many borrowers have wondered if it’s possible to sell their home while the loan on the attached property is in effect. Here, we’ll look at some of the pros and cons of putting the home on the market and what options may be available in the process.
Selling Your Home with a Reverse Mortgage
The good news is that it’s entirely possible to sell your home even with a reverse mortgage. In some ways, this is similar to other residential real estate transactions. However, as a loan is thrown into the process, specific requirements and timelines must be considered by the borrower. Before taking any steps to put your home on the market or to speak with potential buyers, be aware that you’ll be expected to pay back the original loan in full with all the profits from the sale of the house.
If this is your first time even considering the conversation mortgage itself, it’s a good idea to fully understand how the loan works. With a reverse mortgage, the borrower may retain the ownership of the principal residence, but the lender initiates a lien against the property guaranteeing full repayment. One of the major attractions to this type of financing for older homeowners is the fact that monthly mortgage payments are only collected once the loan matures. When this is taken into account, many older homeowners love the idea of retaining their own homes and familiar surroundings.
Keep in mind, however, that terms and guidelines vary according to the borrower’s credit history and from state-to-state. For example, reverse mortgages in California may have unique requirements compared to those in New York, Texas, or Arizona, and you’ll always want to check your eligibility with a reverse mortgage lender before submitting personal information and becoming an applicant.
The Process of Selling
If you think you’re a prospective borrower for such a loan, or if you’ve been through the process and are looking to sell your home, there are a few basic steps to take. First of all, before considering an open house or beginning your real estate advertising, you’ll first have to contact your original lender and confirm the balance owed on the reverse mortgage itself, plus any interest rates and loan agreement. After the negotiations with your lender are settled, you’re free to find a reputable real estate agent.
While selling your house without an agent is possible, if you’re looking to make a solid home sale and use those profits to pay off your loan, an expert can provide counsel in setting up your open house by recommending a good listing service and helping to schedule showings with prospective buyers. Every little bit helps, especially the presentation and concessions available at an open house; companies like Labrador home water delivery and professional cleaning services should be retained to make your showing as welcoming and comfortable for prospective new homeowners are possible.
When Selling Makes Sense
Life is a series of unexpected circumstances. Although a reverse mortgage attracts owners wishing to stay in their familiar neighborhood, sometimes a move to another location is unavoidable. Many people opt to be closer to their grown children or extended family, or they have other reasons to relocate. If that happens after the home equity conversion mortgage has been processed, negotiations and paperwork with the lender to sell the house are possible. Additionally, it may make sense to sell the house if the value of the property is high enough to cover the loan’s initial balance and keep a profit for future use.
Keep in mind, however, that unlike a traditional mortgage, the applicant is paying down the principal balance on the loan while the home value increases. If you sell the home, the remaining balance and selling fees are subtracted from the proceeds, allowing the homeowner to keep the profit.