Many homeowners in Florida have partnered with a reverse mortgage lender for additional income. A reverse mortgage lets them tap into home equity without making monthly mortgage payments, but life can change fast. With unexpected health changes, moving to an assisted living facility, dramatic market moves, or simply wanting to downsize, many senior homeowners wonder if they can sell a house with a reverse mortgage.
The answer is yes, you absolutely can. That said, there are some caveats that go along with it. The home sale process is straightforward when you know how a reverse mortgage works, but that’s the initial challenge for many. In this post, we’ll take a look at what happens to the loan balance, how payoff works, and what you can expect during the sale process. By making more informed decisions, your path forward can become clearer than a Key West evening sky.
Selling a house with a reverse mortgage loan is completely legal. The process is also simpler than you might expect. When you sell, the outstanding loan balance becomes immediately due. This includes the principal, accrued interest, and any mortgage insurance that may be tied to the loan.
Since reverse mortgage loans don’t require mortgage payments, the balance grows over time. As a result, understanding your payoff amount matters tremendously.
To complete a sale, you’ll first need to request a payoff quote from your lender. Then, you’ll use the sale proceeds to pay off the loan. The funds that are left over are yours. Because reverse mortgages are non-recourse loans, you can never owe more than your home’s current market value. This serves as built-in protection against personal liability.
While the sale is ongoing, you’ll still need to pay property taxes, as well as keep up with homeowners’ insurance and any HOA fees.
Finally, you’ll want a real estate agent or real estate attorney who understands reverse mortgage selling rules. As long as the home is your primary residence, and you meet your reverse mortgage obligations, you’re free to sell at any time.
A reverse mortgage is a way for Florida homeowners, aged 62 or older, to access their home equity. They are a unique loan structure known as home equity conversion mortgages. Rather than making monthly payments toward the principal and interest, the loan balance increases over time as interest and insurance accumulate.
You still own the home and keep the property title, but the lender puts a reverse mortgage lien on the property to secure the loan.
Each month, the loan balance grows as interest accrues, and as insurance premiums and servicing fees are added. Since it’s different from a traditional mortgage, you must keep the home as your primary residence, keep it insured, and keep paying property taxes.
One of the biggest protections for Florida senior homeowners is that reverse mortgages are non-recourse loans. This means the remaining balance can never be larger than the current appraised value, even if the bottom falls out of the market.
Throughout the life of the loan, the loan servicer will periodically monitor occupancy. They’ll communicate via statements and manage any communication needed about your loan terms.
There are quite a few situations where a homeowner or family may sell a property that’s tied to a reverse mortgage loan.
One of the most common is when the borrower sells the home to move. In this case, the sale automatically triggers a payoff of the outstanding loan balance. Any remaining equity that’s cashed out is yours to keep.
When the borrower passes away or leaves the home permanently, family members or heirs can sell the property. The lender issues a due and payable notice, and heirs typically have six months (with extensions possible) to complete the sale. As a bonus, heirs won’t be stuck with debt if the current market value is lower than the outstanding balance.
Sometimes, the home’s fair market value won’t cover the payoff. In that situation, a short sale may be allowed. The lender must approve it, but it can protect your financial interests and allow a successful sale without extra out-of-pocket costs. If the borrower doesn’t respond to notices or move to resolve the debt, the lender may initiate foreclosure, but this is usually a last resort.
If you’re comparing this sale to selling when you still owe, the process is very similar. Florida homeowners familiar with the process of selling a house with a mortgage should have no issue with getting through selling a house with a reverse mortgage.
The first step will always be to get a payoff quote from the lender or servicer. This is an important document that lists the reverse mortgage balance, the accrued interest, fees, and remaining mortgage insurance that would need to be paid off at closing. It will also tell you the lump sum that’s needed to complete the sale. The biggest hiccup is that since a reverse mortgage increases over time, the outstanding balance may be more than you realize.
Next, the lender orders an appraisal to confirm your home’s current appraised value. This is critical to determining the fair market value for your property. In a bigger sense, it helps guide pricing and ensures the home’s value and the loan payoff are in alignment. Your market value also governs whether you will walk away from the closing table with money or if you need to explore a possible short sale.
Once you have a payoff quote and property value, all that’s left is to choose how you’re going to sell. Listed sales through an experienced real estate agent net a far wider pool of buyers and a higher potential selling price. The downside is that closing costs and time to close can both be substantial.
Working with a cash buyer can give you a far quicker route to closing, while basing the offer on your home’s value and current condition. If your selling price doesn’t cover the payoff, your servicer may allow a short sale. You may need similar arrangements if you’re selling a house during foreclosure proceedings.
After accepting an offer, closing starts. The title company preps documents, does the title search, and figures out your closing costs. Then the final payoff will be sent to the lender. In the meantime, you’ll continue with your reverse mortgage obligations, as usual.
On closing day, the title company pays off the reverse mortgage in full. If the home sells for more than the payoff, you receive the remaining equity. If not, mortgage insurance covers the difference, and you owe nothing else due to the non-recourse protection. Once funds are distributed, the sale process ends and title transfers to the buyer.
Many people don’t realize it, but selling isn’t the only option. Some Florida homeowners can refinance their mortgage into a different home loan. This is a particularly popular option if their current appraised value has grown.
If you want to keep the home, discuss it with your lender. Ask if the reverse mortgage can be paid off early, or if restructuring is allowed. In rare cases, a family member may consider amortgage assumption, but this depends on the lender’s rules and a range of other factors.
If you decide to work with a cash buyer, choosing the right company makes a big difference. A trustworthy buyer will look at the current market value and give you a no-obligation offer. They’ll give you plenty of time to talk with your real estate attorney or financial advisor.
Ask questions about the company’s experience dealing with reverse mortgage selling. They should be able to give you a clear rundown of their process, from start to finish. Finally, even when you’re looking to sell your Tampa house fast, they shouldn’t ever pressure you.
Even when you’re selling to a cash buyer, the most important thing to remember is to keep up with your financial responsibilities. Keep paying your property taxes, keep the property insured, and continue to pay the HOA fees until the closing date. If you already owe money, like back taxes, you may want to look into selling a house with a lien to get an idea of the extra steps and potential delays involved.
Selling a house with a reverse mortgage in Florida might feel intimidating at first. However, now that you know how it’s similar and how it’s different from a conventional loan, you can get through the process more easily.
If you’re looking to skip that hassle altogether, finding a cash buyer could be a better option. Local investors like The Best Cash Home Buyer can offer you a fair cash offer and a rapid closing that fits your schedule. Reach out to get started.
