As America’s population ages, reverse mortgages are becoming a more popular option for seniors to stay in their homes for as long as possible while accessing the equity built up in their house over the years. Reverse mortgages are available to homeowners aged 62 or older who meet financial qualifications.
Unlike a traditional mortgage, in which the borrower makes monthly payments to reduce the loan balance and build equity, with a reverse mortgage, the borrower receives payments from the lender while the loan balance increases and home equity decreases. These payments can then be used as supplemental income. Borrowers must use the home as their primary residence, ensure its upkeep, and pay any necessary insurance and taxes.
Why sell your home when you’ve taken out a mortgage to help you stay in it for the long term? Circumstances can change quickly, especially for seniors. In most instances, the homeowner is moving to a retirement community, assisted living facility, or with relatives. In other cases, they may simply want to travel, and will no longer use their home as a primary residence.
Whatever the reason for the move, as with any other loan, reverse mortgages must be repaid. In the majority of cases, this occurs when the homeowner passes away or moves. Keep this in mind as you decide if putting your house on the market is the smartest decision for you.
In some ways, selling a home with a reverse mortgage is a little different from the process of most other home sales. However, there are a few differences to consider as you move forward, and hammering out the details can be complex. These tips will help you navigate the process.
Calculate the Balance on Your Loan
Before digging too deep into the sales process, there are two critical calculations to solve: the amount you’ll owe the lending company if your house does sell, and the value of your home.
Review your mortgage documents and financial history to determine the amount that has been paid to you, along with any interest and fees. Obtain a written payoff quote from your mortgage lender. This tells you what it will cost to pay the reverse mortgage in full.
Enlist an expert to get the best idea of your home’s value, and compare that to your mortgage balance. If your home’s value is higher than the balance of the mortgage, any remaining proceeds are yours to keep. If you’re unable to repay the balance, it may be prudent to negotiate a short sale, which occurs when the mortgage exceeds the property value.
Enlist a Real Estate Agent
Reverse mortgages can add an extra time-consuming, complicated layer to the home sales adventure. You need an expert real estate agent in your corner, especially if you’ve been away from the housing market for several years. Full-service Clever Partner Agents are top performers in their local markets. They’ll help you every step of the way, from pricing, listing, marketing, and showing your home, to navigating negotiations and closing costs.
Make Necessary Repairs
Look for obvious signs of disrepair: stains on the ceiling, cracked walls, a drafty window- and focus on fixing them. Even small repairs go a long way to making your house move-in ready for potential buyers. A complete home renovation is a massive undertaking and will likely leave you in the red after the sale is complete. Finding the line between fixing up your property and blowing your budget can be tricky. But smart, practical renovations, like updated flooring or a new kitchen faucet, can equal more cash at the point of sale.
Show It Off
This is the time for your home to shine! If you’re able, hire a professional cleaning service to get everything ready for show. It may be worth updating the decor, especially in the most visible rooms. A fresh coat of paint and a vase of fresh flowers will make your home seem brighter and cleaner. Your real estate agent will give you tips on what’s hot with buyers and help you stage the interior of your house to make it extra appealing.
Consult a Real Estate Attorney
Depending on where you live, you may need to work with a real estate attorney in order to sell a home with a reverse mortgage. Even if you don’t hire an attorney, it’s helpful to at least set up a consultation to ensure the mortgage payment is being handled correctly. Your real estate agent can help you decide if legal services make sense in your unique situation.
If you’re looking for further information on selling a house with a reverse mortgage, reach out to an experienced real estate agent in your area. They’ll offer guidance in dealing with lending companies, help you prep, list, and show your home, and take the stress out of the sales process.