Selling Your California Home with A Reverse Mortgage

There are a few extra things to consider if you want to sell your home and you currently have a reverse mortgage. Just like with any mortgage loan, when you sell your house your reverse mortgage will need to be repaid, including any accrued interest and any applicable fees owed.

A home valuation is always smart but with a reverse mortgage, you will want to get a current home appraisal to best determine the home’s value. This is essential for helping you understand how much of the estimated sale proceeds will need to be used to pay off your Reverse Mortgage and how much you can expect to keep.

Once you’ve determined the current value of your home, it’s time to list it on the market. Once your sale is in process you will want to communicate with your reverse mortgage lender. Let them know your home is under contract and find out the best way to help ensure the process goes smoothly and your loan is paid off in a timely matter after the sale closes.

If your home’s sales price is less than what you owe for your reverse mortgage you will need to look to your loan FHA insurance to cover the extra funds needed to repay your loan.

If you are selling a home with a reverse mortgage and the borrower has passed away you will need to work closely with the Reverse Mortgage lender to coordinate the home sale and loan repayment. It’s important for home sellers to consult with a financial advisor or real estate professional experienced in handling reverse mortgage to fully understand any intricacies involved with selling a home with an active reverse mortgage.

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How Does a Reverse Mortgage Loan Work?

In California where living costs are high many of our mortgage clients over the past few years have reached out to us about whether a reverse mortgage could be a good choice for their needs. A reverse mortgage is a home loan specifically designed for homeowners who are aged 62 or older who have a lot of equity in their home.

Unlike a traditional mortgage where the homeowner makes monthly payments to a lender, a reverse mortgage allows homeowners to convert part of their home equity into cash without selling the property. With a reverse mortgage homeowners can receive the proceeds from their loan as a lump sum, monthly payments, or a line of credit.

One of the most appealing features of reverse mortgages for seniors is that they do not require monthly mortgage payments. Instead, the loan balance accumulates over time, typically with interest. Borrowers are still responsible for property taxes, homeowners insurance, and maintenance of the home. A reverse mortgage loan is repaid when the homeowner sells the home, moves out of the home, or passes away. When one of those events occurs, the proceeds from the home sale are used to repay the reverse mortgage, and any remaining equity goes to the homeowner or their heirs.

There are many advantages to these types of loans but it’s important to remember reverse mortgages can provide additional income for seniors, they come with their own risks and considerations. Interest accrues on the loan balance, which can reduce the equity in the home over time. Before considering a reverse mortgage, homeowners are advised to thoroughly understand the terms and explore all the alternatives for their situation.

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