Reverse mortgages let older homeowners tap into their home equity without selling the property or making monthly payments.
They can help you pay for everything from healthcare expenses to bucket-list adventures in your later years.
But here’s the catch…
The longer the loan goes unpaid, the more interest you’ll accrue — and the more home equity you’ll lose.
That’s why a reverse mortgage can complicate matters when it comes time for you (or your beneficiaries) to sell your house.
What extra steps will the loan add to the sale?
How will the loan balance affect the proceeds?
What if you pass away and leave your heirs to deal with the sale?
There are a lot of questions involved, but the process isn’t overly complicated.
Here’s everything you need to know about selling a house with a reverse mortgage.
Can you sell a house with a reverse mortgage?
Yes, you can sell your house with a reverse mortgage tied to it.
The important thing to remember is that the total payoff amount is calculated differently compared to a traditional mortgage.
Here’s how it works…
Let’s say you took out a $300,000 reverse mortgage five years ago.
Over time, the accrued interest and fees added $120,000 to your loan balance.
You haven’t made any payments toward the loan, so your total payoff amount is now $420,000.
Now, let’s say your home sells for $600,000.
The payoff of $420,000 would be deducted from the $600,000, leaving you with $180,000.
But you’ll also need to pay closing costs when you sell your home.
Let’s say these add up to $40,000 in agent commissions, title and escrow fees, and other expenses.
That leaves you with $140,000 in net proceeds from your equity.
But what happens if your home doesn’t sell for enough to cover the balance?
Here’s the good news…
Reverse mortgages are non-recourse loans, which means you’ll never owe more than the house is worth.
For example, if the home sells for $400,000 — less than the $420,000 payoff amount — the lender will accept the full sale price as payment.
You or your beneficiaries won’t have to cover the difference — mortgage insurance will take care of it.
Key things to know before selling a reverse mortgage home
Settling a reverse mortgage via the sale of your home isn’t complicated.
But there are unique rules and timelines you’ll need to keep in mind.
Here are the key things to know before you start the process.
You must continue living in the home while selling
A key condition of a reverse mortgage is that you must use the property as your primary residence.
If you move out — even temporarily — the lender may consider this a “maturity event,” which triggers the loan to become due immediately.
So it’s best to remain in the home until the sale is completed.
But what if you’re in a situation where staying in the home isn’t possible (e.g., moving into assisted living or living with family)?
In that case, it’s critical to proactively communicate with your lender.
Let them know you’re moving out and that you plan on listing your home for sale.
Most lenders are willing to grant an extension that will give you time to proceed with the sale, without triggering a loan default.
Selling can be time-sensitive
A reverse mortgage comes with a built-in clock.
Once the loan becomes due — usually triggered by moving out, passing away, or defaulting on property taxes or insurance — you’ll need to act quickly.
Why?
Because the longer you wait, the more you eat into your home’s equity.
Starting the selling process sooner helps you avoid further interest, fees, or foreclosure.
This is especially important if you’re selling a home after your parents pass.
Lenders typically like to “watch the clock” –– so delaying the process could make an already stressful situation harder to manage.
The bottom line?
Don’t wait.
The sooner you act, the more control you’ll have over the outcome — and the more equity you can protect.
The sale can affect beneficiaries
You might decide to keep your home and reverse mortgage until you pass away.
If so, it’s important to consider the impact on your beneficiaries when selling an inherited house.
Shortly after you die, your heirs will receive a “due and payable” notice from your mortgage servicer.
According to the Consumer Financial Protection Bureau (CFPB), they’ll have 30 days to decide how to repay the loan.
Your heirs typically have three options to settle the loan:
- Buy the home by paying off the loan balance.
- Sell the home and use the proceeds to repay the reverse mortgage.
- Turn the home over to the lender if the loan balance exceeds the home’s value.
It’s common for the timeline to be extended by up to six months (sometimes longer), but the key point remains…
Your beneficiaries will need to act quickly to resolve the loan.
So make sure your heirs understand their obligations and are prepared to manage the reverse mortgage when the time comes.
How to sell a home with a reverse mortgage
Preparing to list a home with a reverse mortgage requires a bit of extra planning.
But you can simplify the process by focusing on the most important factors.
Here are the key steps to take when selling a house that has a reverse mortgage.
1. Contact your lender
Selling a home is one of the main events that triggers a reverse mortgage to become due.
So your first step is to notify your reverse mortgage servicer.
Letting them know you intend to sell the property ensures they can prepare to settle the loan.
When you contact the lender, request a payoff statement.
This document outlines your total loan balance, accrued interest, fees, and any prepayment penalties.
While the escrow company will handle the actual payoff at closing, knowing these details up front is useful.
You can use this amount to guide you on your listing price.
It can also help you decide how much to reasonably invest in repairs or updates before putting your home on the market.
2. Consult with professionals
Selling a home with a reverse mortgage has its own set of rules, so having the right support is key.
The process is easier to navigate when you work with experienced professionals.
Their guidance can help you avoid common mistakes and make confident decisions along the way.
Here are the key experts to involve:
- Real estate agent: A listing agent experienced in selling homes with reverse mortgages will know how to guide you through the specific challenges of this type of sale from the start. But experience alone isn’t enough when it comes to selecting the right agent to sell your home.
- Reverse mortgage counselor: If you have a home equity conversion mortgage (HECM), you likely worked with a HUD-approved counselor to set up the loan. They can help you review your obligations, explain the loan payoff process, and explore your options.
- Financial advisor: A financial advisor can provide clarity on tax obligations, estimate your net proceeds, and offer guidance on the financial impacts of selling your home.
3. Determine your home’s market value
Knowing your home’s worth is a key step when selling and closing out a reverse mortgage.
It helps you understand what you might walk away with after paying off the loan.
The best way to figure out the right asking price?
Have your real estate agent run a comparative market analysis (CMA).
A CMA looks at recent sales of similar homes in your area, comparing size, condition, and features.
This analysis is similar to an appraisal but allows for more flexibility to determine a more accurate fair market value.
Your agent can adjust the pricing for unique details and help you decide if any repairs or updates are worth making.
Once you have a target price, subtract the loan payoff amount, agent commissions, and closing costs to estimate your net proceeds.
If the home’s value is less than what you owe, contact your reverse mortgage servicer or a HUD-approved counselor to discuss your options.
4. Prepare the home for sale
Before listing your home, you’ll need to decide which repairs or improvements are worth making to get it market-ready.
Many sellers with a reverse mortgage prefer to keep this step simple and avoid spending too much.
And that’s perfectly fine.
You can sell your property as-is with minimal work.
Or you can choose the most important repairs (with the help of your agent).
A pre-listing inspection can also help you prioritize what’s worth fixing.
Whatever approach you take, the goal is to make the home as appealing to buyers as possible.
At the very least, declutter and deep-clean it to ensure it’s ready for showings.
5. List and market the property
Your house won’t sell itself — it needs the right marketing strategy to stand out.
Work with your agent to craft a strong online listing and attract serious buyers.
What makes a great marketing plan?
- A well-crafted listing description that highlights your home’s best features, paired with professional photos that showcase it in the best light
- Strategic staging to depersonalize key spaces and make them more appealing to potential buyers
- Open houses and private showings that present the property at its best — even if you’re selling as-is or with minor repairs.
Smart marketing can help generate more interest in your home.
And more interest means better offers, improving your chances of getting the best price for your reverse mortgage property.
6. Accept an offer and begin closing
Once the offers start rolling in, you and your listing agent will need to carefully review and choose the best one.
Ideally, the offer will exceed your reverse mortgage payoff amount, leaving you with cash in hand.
But the offer price isn’t everything — there are other critical factors to consider:
- Buyer’s source of funds: Are they paying in cash or using financing? If it’s financed, check for a strong down payment and proof of funds to ensure they can close without delays.
- Contingencies: Verify whether the offer is contingent on an appraisal or inspection. These can add time, allow for repair requests, or even give the buyer a way to back out. Make sure you understand the terms and timelines involved.
Your agent will guide you through these details and help negotiate for the best possible outcome.
Once you accept an offer, the closing process begins.
This typically includes:
- The buyer’s lender ordering the appraisal
- The buyer potentially conducting their own inspections
- Negotiating and completing any agreed-upon repairs
- Submitting necessary documents to the buyer’s lender and title company.
Closing usually takes 30 to 60 days, but you can negotiate the timeline in the sales contract to fit your needs.
If you can’t be there for important steps, don’t worry — you can assign someone real estate power of attorney to handle signing and finalizing the sale on your behalf.
7. Pay off the reverse mortgage and settle any fees
Paying off your reverse mortgage is a key part of the closing process when selling your home.
The lien is usually settled seamlessly as part of the transaction.
At closing, the reverse mortgage balance is repaid directly from the sale proceeds.
The escrow officer coordinates the loan payoff with your reverse mortgage servicer –– so you won’t need to manage the details yourself.
Remember that closing costs, agent commissions, and any other selling-related expenses will also be deducted from the proceeds.
Any remaining equity after paying off the loan and closing costs can be wired directly to your bank account.
If your heirs are selling a property held in a trust after your death, the proceeds may instead be wired to the trust’s account.
Offload a reverse mortgage property with ease
Selling a house with a reverse mortgage is absolutely possible — you just need to understand the steps involved.
Start by getting your loan payoff amount so you know exactly what you’ll owe.
From there, you can establish a fair asking price, decide which repairs (if any) are worth making, and prepare to list and market your home.
It might seem like a lot.
But the process becomes much easier when you have a good Realtor.
Partnering with the right listing agent will help you get the most out of selling your reverse mortgage home.
That’s where SoldNest comes in.
We do the heavy lifting to find and vet top local agents who specialize in unique selling situations like yours.
Learn more about how we match sellers with the best agents for their needs.
