Can a person with a reverse mortgage sell their house?
Of course. Let's say that you have a reverse mortgage for $200,000. You are selling the property for $450,000. You would get the payoff amount ($200,000), from the mortgage company, and, at closing the lender would be paid off.
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. Most reverse mortgages are Home Equity Conversion Mortgages (HECMs).
The borrower(s) retains title to the property. The reverse mortgage lender is merely extending a loan to the borrower.
As the calendar turns to 2024, the Federal Housing Administration (FHA) has made a pivotal announcement that is set to impact the landscape of Home Equity Conversion Mortgages (HECM).
When you – and any co-borrower(s) or an eligible non-borrowing spouse as applicable – have passed away, your reverse mortgage loan becomes due and payable. Your heirs have 30 days from receiving the due and payable notice from the lender to buy, sell, or turn the home over to the lender to satisfy the debt.
Reverse mortgages are complicated, come with extensive restrictions and requirements, and under many different circ*mstances, can be foreclosed.
A reverse mortgage isn't free money: The borrowing costs can be high, and you'll still need to pay for homeowners insurance and property taxes. Reverse mortgages can also complicate life for your heirs, especially if they don't want the home or the home's value isn't enough to cover what's owed.
Borrowers Couldn't Meet Their Loan Obligations
With a reverse mortgage, a borrower is no longer required to make monthly mortgage payments. They are, however, still responsible for paying their property taxes, mortgage insurance, and any other home-related expenses, like HOA dues.
Exercise your right to cancel the loan
This right is a form of consumer protection that enables you to walk away from a reverse mortgage without penalty, for any reason, within three days of signing the loan agreement. To cancel the mortgage, you must inform the lender in writing.
- Use your right of rescission within three days of closing for no penalties. ...
- Sell your home and pay the loan back.
- Refinance into a more favorable rate and term.
- As a last resort, you can walk away by surrendering the deed.
Is a reverse mortgage a lien on your house?
1923.3. A reverse mortgage shall constitute a lien against the subject property to the extent of all advances made pursuant to the reverse mortgage and all interest accrued on these advances, and that lien shall have priority over any lien filed or recorded after recordation of a reverse mortgage loan.
Use Your Right Of Rescission
Reverse mortgages have a 3-day period directly after you close on your loan in which you can cancel the transaction with no penalty. This is known as the right of rescission and it allows you to change your mind should you have buyer's remorse right after you sign the closing documents.
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.
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.
With a traditional reverse mortgage, borrowers are not permitted to receive more than 60 percent of the total loan proceeds in the first year. With a jumbo reverse mortgage, borrowers may access 100 percent of the loan proceeds in the first year.
If the loan balance is more than the home is worth, the estate or heirs may sell the property for at least 95-perent of the current appraised value and the lender will accept the net proceeds as satisfaction of the loan.
Heirs can inherit a home with a reverse mortgage but will be responsible for settling the debt, either by paying it off, selling the home, or turning it over to the bank.
Once a reverse mortgage homeowner dies, the lender sends a letter to the heirs explaining that the loan is due. Beneficiaries then have 30 days to figure out how they want to proceed. That's why lenders suggest finalizing a strategy in advance. Lenders typically give heirs six months to complete the transaction.
You cannot negotiate a reverse mortgage payoff. However, an heir to a property with a reverse mortgage can pay back 95% of the home value at that time if the balance on the mortgage were to exceed the home value if they wanted to keep the property.
| Updated: February 9, 2024 | HECM Fixed Rate | Jumbo Adjustable (Proprietary) |
|---|---|---|
| Current Rates | 7.56% - 7.93% | 11.385% - 11.635% |
| APR | 8.996% - 9.427%* | N/A |
| Index | N/A | 4.76% |
| Margin | N/A | 6.625% - 6.875% |
What does Suze Orman say about reverse mortgages?
Taking a loan too early
The earliest a homeowner is eligible to take out a reverse mortgage is age 62, but Orman considers it risky to do so. "If you tap all your home equity through a reverse at 62 and then at 72 you realize you can't really afford the home, you will have to sell the home," she said.
Reverse mortgage loans typically must be repaid either when you move out of the home or when you die. However, the loan may need to be paid back sooner if the home is no longer your principal residence, you fail to pay your property taxes or homeowners insurance, or do not keep the home in good repair.
There are no credit score or income requirements for a reverse mortgage, and they can be a great way for seniors to access much-needed funds if they find themselves struggling at that time of life.
Because they often involve high fees—and the interest accrues on an increasing loan balance—reverse mortgages are an expensive way to borrow money. These added costs can cut into your home equity and reduce your family's inheritance when you die.
| Counseling Agency | Next Availability | Phone |
|---|---|---|
| Hanco*ck Community Development, Inc | 24-48 Hrs. | 877-284-4326 |
| Money Management International (MMI) | 48-72 Hrs. | 877-908-2227 |
| GreenPath Financial Wellness | 1 Week | 888-860-4167 |
| Hope Inc. | 1 Week | 844-432-6467 |
