What do you do if you have a reverse mortgage and you now want to sell your home? Some homeowners may think that a reverse mortgage puts the bank in control of their home, but the truth is selling a home with a reverse mortgage is similar to any other home sale with a mortgage. However, there are a few important differences that you will need to be aware of.
A Triggered Maturity Event
A maturity event is when the reverse mortgage loan becomes due and payable. In most cases, it is when the last borrower on the loan permanently leaves the home; selling the home qualifies as such an event. The date maybe when the house is listed or when you accept an offer. You will need to contact your loan servicer for the exact date.
Contact Your Loan Servicer
Once you have the date of the maturity event, contact your reverse mortgage loan servicer within 30 days. Upon receiving notification, your loan servicer will send out a “due and payable” letter and will follow up by having an FHA-approved appraiser come out to determine the current market value of the property. Once the “due and payable” letter is received, you will need to respond to your loan servicer within 30 days of the date of the letter, otherwise, your lender may proceed with foreclosure.
A reverse mortgage loan is “non-recourse”, meaning that if you sell the home to repay the loan, you will never owe more than the loan balance or the value of the property, whichever is less; and no assets other than the home must be used to repay the debt.
Have a Repayment Plan
The repayment of a reverse mortgage is due when the maturity event is activated. It can vary by lender and the terms of your loan, but you will likely have up to six months to repay the reverse mortgage loan. If you need additional time with the home sale process, be sure to reach out in advance to your lender. Most lenders will provide extensions as long as they see that you are actively trying to sell the house.
Settle and Disperse the Loan Proceeds
Like a traditional or forward mortgage, once the home is sold the funds will be distributed at closing and the necessary money will go towards paying off the reverse mortgage. If the proceeds from the sale of the home exceed the amount owed on the reverse mortgage, any remaining money (equity) is distributed to the home seller.
Below is what you will be paying off when the reverse mortgage is settled:
- The principal amount borrowed throughout the reverse mortgage
- The accrued interest on the amount borrowed
- Other unpaid fees (i.e., mortgage insurance)
If you have additional questions about selling a home with a reverse mortgage, feel free to call 1(800) 976-6211 to speak to a licensed loan advisor.