Can you sell a house with a reverse mortgage?

Can you sell a house with a reverse mortgage? Yes, here's how

A reverse mortgage is a loan against your home's equity, not a sale of the home. The title stays in your name. That means you can sell the house the same way you'd sell any house with a mortgage: you accept an offer, the title company requests a payoff figure from the loan servicer, and the loan is paid in full at closing.

The difference from a regular mortgage is the balance. With a reverse mortgage you usually don't make monthly payments, so interest and fees are added to the loan over time and the balance grows. Before you sell, ask the servicer for a current payoff statement so you know what you'll walk away with. Ask how long the figure is good for, because the balance changes every month.

How a reverse mortgage works

Most reverse mortgages in the U.S. are Home Equity Conversion Mortgages, or HECMs, which are insured by the Federal Housing Administration. They let homeowners who are at least 62 borrow against their home's equity and receive money as a lump sum, monthly payments, a line of credit or a mix.

The loan doesn't have to be repaid while you live in the home and keep up with your obligations. It generally becomes due when the last borrower dies, sells the home, or permanently moves out. It can also become due if you stop paying property taxes or homeowner's insurance, or don't maintain the home. Reading your loan documents, or asking the servicer, tells you exactly which events apply to your loan.

Borrowers must meet with a HUD-approved counselor before getting a HECM, and that counselor is also a good free resource later, when you're deciding whether to sell. Private reverse mortgages that aren't HECMs exist too, and their terms can differ, so read your own loan documents rather than relying on general rules.

How to sell a house with a reverse mortgage, step by step

Selling a house with a reverse mortgage follows a familiar pattern, with a few extra phone calls. The servicer, not the original lender, is the company you deal with; its name is on your monthly or annual statements. If you're an heir, the servicer will ask for a death certificate and proof that you have authority to act for the estate before it shares details.

• Call the servicer and request a payoff statement, and tell them you plan to sell
• Get a sense of value from an appraisal, an agent's market analysis or written offers
• Choose how to sell: list with an agent or sell directly to a buyer
• Accept an offer and open escrow with a title company
• The title company orders the final payoff and pays the loan at closing
• You or the estate receive the remaining proceeds

What if the reverse mortgage balance is more than the house is worth?

Because the balance grows, it can eventually exceed the home's value, especially if values fall. HECMs are non-recourse loans, which means the borrower or their estate generally won't owe more than the home is worth when it's sold. The FHA insurance covers the shortfall.

If the house is underwater, the servicer has rules about the minimum sale price it can accept, often tied to an appraisal. Talk with the servicer before you accept an offer so the sale isn't rejected at the last minute. A HUD-approved housing counselor can help you understand the options at no cost.

What happens to a house with a reverse mortgage when the borrower dies

When the last borrower dies, the loan becomes due. The servicer will contact the estate or heirs, and the heirs generally have a limited time to decide what to do, with possible extensions if they're actively working on a sale or payoff. Contact the servicer early and keep them updated in writing.

• Sell the house and use the proceeds to pay off the loan; keep any remaining equity
• Pay off the loan with other money or a new mortgage and keep the house
• If the house is worth less than the loan, heirs who want to keep it may be able to pay less than the full balance under HECM rules; ask the servicer
• Sign the house over to the lender with a deed in lieu of foreclosure if no one wants it

What happens to your house with a reverse mortgage if you move out

A reverse mortgage requires the home to be your principal residence. If you move permanently, such as moving in with family or into a long-term care facility for an extended time, the loan can become due. Many borrowers sell the house at that point and use the remaining equity toward their new living costs.

If you're planning a move, call the servicer before you go. Ask how they define a permanent move under your loan, what they'll need from you, and how much time you'll have to sell.

If your spouse isn't on the reverse mortgage

Some borrowers have a spouse who wasn't a borrower on the loan, often because the spouse was younger than 62 when it was taken out. Depending on when the loan was made and whether the spouse meets certain conditions, an eligible non-borrowing spouse may be able to stay in the home after the borrower dies. The rules are specific, so the spouse should contact the servicer promptly and consider talking with a HUD-approved counselor.

Listing vs a cash sale for a house with a reverse mortgage

If the home is in good condition and there's time, listing with an agent usually brings the highest price, which means more equity left after the payoff. Reverse mortgage homes, though, are often older and haven't been updated in years, and heirs are often working against the servicer's timeline from a distance.

A direct cash sale fits when the house needs work, when it's full of belongings, or when the heirs want a firm closing date they can give the servicer. Because a cash buyer prices in condition, compare the net proceeds of each path, after commission, repairs and carrying costs.

Timing matters more here than in most sales. The loan balance keeps growing while the house sits, and property taxes, insurance and upkeep still have to be paid. A sale that closes sooner at a slightly lower price can leave more equity than a listing that drags on for months, while a listing can still come out ahead when the house shows well and the market is strong. Run both numbers with the current payoff in hand.

What to watch for when you sell a house with a reverse mortgage

Keep paying property taxes and insurance until closing; missing them can trigger a default. Don't rely on an old payoff figure, because interest keeps adding up. Be wary of anyone offering to "take over" the reverse mortgage or asking for fees up front. And use a title company you can verify independently, so the payoff goes straight to the servicer and the rest comes to you.

If family members disagree about selling, or the estate has other debts, a probate attorney can explain who has authority to sign and in what order the money is paid. Getting that settled early keeps the servicer's timeline from becoming the thing that decides for you.

Can you sell a house with a reverse mortgage to Prominent?

Yes. Prominent Cash Offer buys houses directly, as-is, in any condition, including homes with a reverse mortgage. If the property is a fit, you or the estate get a written cash offer with the terms spelled out. There are no fees or commissions, we pay the closing costs, and you choose a closing date that works with the servicer's timeline. The reverse mortgage is paid off at closing through the title company. There's no obligation to accept.