Can You Sell a Home with a Reverse Mortgage? | AAG (2024)

FAQs

Can You Sell a Home with a Reverse Mortgage? | AAG? ›

You can sell your house as is with a reverse mortgage as long as you coordinate and cooperate with your bank loan servicer. You'll still be responsible for the remaining balance owed, but the return from the sale will go directly towards paying it off, and if sold correctly could pay it off entirely.

Selling a home that has a reverse mortgage can be tricky, and isn't quite the same as selling one with a traditional mortgage (or no mortgage at all). However, it can be done if you understand the process. Before you make a decision, learn more about how to sell a house with a reverse mortgage.

You can get out of the reverse mortgage without penalty by refinancing into a traditional loan, paying off with other funds, or simply selling your home. If you don't like the balance rising, repay each month towards the interest charges and protect your equity position.

+ Can a reverse mortgage lender take my home away if I outlive the loan? No, they cannot. And the loan is not due at that time either.

You'll only need to pay capital gains taxes on a reverse mortgage sale IF you make a profit of at least $250,000 if you're single (or $500,000 if you're married).

This means your heirs can pay off the loan by selling the home for at least 95 percent of the home's appraised value. The rest of the loan is covered by the mortgage insurance that the reverse mortgage borrower paid during the duration of the loan.

Walk Away. You can walk away from a reverse mortgage as a last resort. Handing over the deed to the lender will release you from your loan, but you will also lose your house.

Yes. If you do not physically live in your home for more than 12 consecutive months, even if it is involuntary on your part, your reverse mortgage will become due, and you could lose your home to foreclosure if you can't afford to pay it off.

Home Equity Conversion Mortgages (HECMs), the most common type of reverse mortgage loan, require that you keep current on your property taxes and homeowners insurance. Failure to pay either may lead to foreclosure.

If the end of your term is up before you pass away, then you have outlived your reverse mortgage proceeds. With a term payment plan, you reach your loan's principal limit—the maximum that you can borrow—at the end of the term. After that, you won't be able to receive additional proceeds from your reverse mortgage.

How many people lose their homes to reverse mortgages? ›

A USA TODAY review of government foreclosure data between 2013 and 2017 found that nearly 100,000 reverse mortgage loans have failed, burdening elderly borrowers and their families and causing property values in their neighborhoods to crater.

The reverse mortgage lender cannot do anything that the owner of the property does not agree to allow the lender to do when the loan is originated. If you are on the loan with your mom, then you also have the right to stay in the home for as long as you wish.

No. When you take out a reverse mortgage loan, the title to your home remains with you. This webpage has information about HECMs, which are the most common type of reverse mortgage.

If you decide to sell your home while you have a reverse mortgage loan, you will have to pay back the money you borrowed plus interest and fees. If your loan balance is less than the amount you sell your home for, then you keep the difference.

No, reverse mortgage payments aren't taxable. Reverse mortgage payments are considered loan proceeds and not income. The lender pays you, the borrower, loan proceeds (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home.

Yes, you can inherit a house with a reverse mortgage, but you will need to decide how you are going to settle the reverse mortgage loan depending on whether you want to keep or sell the home.

Relatively High Fees

Real estate closing fees: As with a regular mortgage, reverse mortgages can rack up a variety of closing costs, including a home appraisal and inspection, title search, recording fees, mortgage taxes, and a credit check of the applicant, among others.

Yes. If you do not physically live in your home for more than 12 consecutive months, even if it is involuntary on your part, your reverse mortgage will become due, and you could lose your home to foreclosure if you can't afford to pay it off.

The house becomes a part of your estate and the reverse mortgage along with it. (That is, unless you decide to sell the house or pay off the loan.) This applies if you are on the loan as a co-borrower, or if you are treated as an eligible non-borrowing spouse.

According to this rule, the initial amount that a homeowner can borrow through a reverse mortgage is limited to 60% of the home's appraised value or the maximum claim amount, whichever is less.