How to Sell a House with a Reverse Mortgage in Massachusetts

Now more than ever, becoming a homeowner can be challenging. With home prices higher than ever, finding creative ways to afford to purchase is a necessity for most potential buyers. One way that buyers can achieve this is through a reverse mortgage. However, the difficulty comes in when attempting to sell a home with that type of financing. As with most states, Massachusetts specifically offers plentiful information on the process of getting a reverse mortgage and the risks associated. Luckily, we can provide you with some guidance and advice on how to navigate selling a house with a reverse mortgage in the state of Massachusetts.

What Is a Reverse Mortgage?

Most people are familiar with a mortgage, as it’s the most common way that buyers can become homeowners. However, there’s less knowledge around a reverse mortgage. A reverse mortgage differs from a traditional mortgage in that the borrower does not pay monthly payments; instead, the principal is paid back after the homeowner moves out of the house. The principal continues to increase, making this a rather risky financial decision. It is generally used by older potential buyers, usually after retirement.

How to Sell a Home With a Reverse Mortgage

The actual process of selling a home with a reverse mortgage is not actually that different from selling a house with a traditional mortgage. The significant difference that accompanies selling a home with a reverse mortgage is the hefty financial burden of paying back the entire mortgage upon the home’s sale. Since older potential buyers most commonly use the reverse mortgage, this means that often the responsibility is left to children or relatives after the homeowners have passed.

Here are some first steps when preparing to sell a home with a reverse mortgage:

  1. Assess the value of the home

The most important thing you’ll want to assess is if the home’s value is comparable to the outstanding balance. If the house has been maintained and in good shape, the financial burden might not be as significant. You’ll want to quickly contact a real estate agent to run comps and assess the value of the home. This can be quite an emotional stage, as many people are attached to their home and therefore inflate the price they believe the house can sell for. With an excellent agent, trust the process and their professional opinion–they’re taking into account all of the factors that impact the price of the home.

  1. Prepare for sale of the home

Once you’ve determined the price of the home, you’ll need to ensure that home is ready for resale. In this situation, mainly if you’re selling the home for a deceased parent who lived in the home for many years, you may have to put a bit of money into prep in order to get the money you’ll need to pay back the reverse mortgage. While it might seem counterintuitive (or scary)  to spend money to make money, a trusted real estate agent can guide you in selecting the fewest number of changes that have the most significant return potential.

  1. Pay Back

Once you’ve sold the home in question, it’s time to pay back the reverse mortgage. If you are taking over for a loved one, you will have been communicating with the lender throughout the process in order to understand your next steps. Once you have the funds available, you’ll be able to pay the funds back to the lender, successfully completing the reverse mortgage. If there are any funds leftover from the sale, they can be distributed amongst any heirs.

What Do I Do if I Can’t Afford to Pay the Mortgage?

The risk associated with a reverse mortgage is that at the end of the sale, there is not enough money to pay the loan. If you find yourself in this situation, there are several steps you can take. One option might be a Home Equity Conversion Mortgage (HECM). This option requires that you meet the requirements listed on the U.S. Department of Housing and Urban Development’s website. This may be your best option. If you are not eligible for this type of mortgage, consider asking your real estate for options early on in the process.

We Can Help

If you still have questions regarding your specific situation, we highly encourage you to reach out to us for more guidance and information. We know that selling a home can be beyond stressful, especially when you are dealing with a more complicated financing situation. Dealing with a trusted real estate agent can support you as you navigate your next steps.

Our licensed real estate consultants will be able to answer any questions you may have regarding the options that may be available to you. Navigating pricing, resale, and how to correctly complete the process can be stressful, especially when emotions are running high. We can guide you through this process and offer advice.

Reach out to us for more information on how we can work with you to make this a more straightforward and smooth process. We’re here to help!

To schedule a free, no-obligation consultation, get in touch with us today!

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