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May 13, 2016

Reverse Mortgage Information: Selling the Home After a Reverse Mortgage

Reverse Mortgage Information: Selling the Home After a Reverse Mortgage

Before getting a reverse mortgage, seniors should take advantage of all the reverse mortgage information available to them. One subject commonly missed by seniors seeking reverse mortgage information is the topic of repayment. While it is true that seniors can defer repayment until they die or sell their home, a reverse mortgage will eventually become due. When this time comes, both borrowers and their heirs should know how to handle this important step in the loan process.

Can Seniors Sell Their Home After Getting a Reverse Mortgage?

When it comes to selling one’s home after taking a reverse mortgage, many seniors find much of the available reverse mortgage information confusing. The fact is seniors can choose to sell their homes at any time, but they should be aware that doing so will make their loan become due. To get the most from a reverse mortgage, borrowers should remain in their homes for at least a few years after getting their loan. Seniors who want to move in the near future might benefit more from the HECM for Purchase program, which allows seniors to purchase a home with a reverse mortgage.

Reverse Mortgage Information: How a Borrower’s Estate Is Handled After Their Passing

While gathering reverse mortgage information, many seniors are also interested in how their loan will be paid off upon their death. Reverse mortgages become due once all borrowers named on the loan die. If there are two borrowers, both individuals must pass away before their lender can require repayment.

Since the borrowers would not be in a position to repay the loan themselves, the responsibility would be handed down to their heirs. In this case, the borrowers’ heirs would have three main choices: sign the deed over to the bank, sell the home, or refinance the loan. If the balance of the loan exceeds the home value, heirs could avoid the responsibility of selling the home by signing the residence over to the lender.

If the home is worth more than the loan balance, heirs would benefit more from selling the home themselves. As long as the individuals make a good effort to sell the home, the lender should give them 12 months to find a buyer. Once the home is sold, the lender will be repaid, and the borrowers’ heirs will keep any remaining funds. It is, however, important to understand that the lender will expect the home to be sold for its appraised value. If the selling price is much lower than the appraised value, the lender might require additional payment. This keeps people from taking advantage of lenders by selling homes to family or friends at much discounted prices.

A borrower’s heirs can also repay their lender by refinancing the loan or liquidating other assets. Lenders do not dictate how reverse mortgages are repaid; they only require that the funds are repaid in a reasonable amount of time. To allow one’s children to inherit the family home, some borrowers also purchase life insurance policies that cover the balance of their reverse mortgage. While researching reverse mortgage information, seniors should look into the many different options their heirs will have for repaying their loan in the future.


An article by Brittney Parks
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