If you have found yourself in a position where you are unable to make a payment and need to rely on the sale of your property to complete it, then you can apply for a reverse mortgage where the money from the sale can be used to pay off any existing debt.
In this guide, we’ll be taking you through everything you need to know about reverse mortgages and what you need to know about applying for them, and how the process works.
Before you apply for a reverse mortgage, you need to understand what they actually are and why people apply for them.
The majority of times that a reverse mortgage is used is for people who want to retire as the money made from the sale can change the equity from the home into a lien which means that they can make monthly payments on a new home which allows them to track their money better.
Reverse mortgages mean that you can pay smaller amounts of equity into your property which allows the mortgage of the property to stay in your name and allows you to reserve the rights to sell the property.
There are similarities between reverse mortgages and traditional mortgages as both require you to pay the complete amount owed on the mortgage.
If you plan to sell your property using a reverse mortgage which in many ways is a similar process to a traditional home sale. There are certain unique elements that come with the reverse mortgage process; however, that it is important to learn about.
There is a strict agreement between you and the servicer that has to be entirely adhered to and if the terms are broken then you are at risk of losing your chances of getting your mortgage approved.
The reason why such a contract is in place is to prevent any borrowers from using the process as a way to use the system as a loophole in order to prevent paying any extra costs.
If you attempt to do this then you will be facing a high chance of foreclosure on your property. Those who follow the rules and adhere to the terms and conditions, they will find the whole process free from any risk or trouble.
Selling your home using a reverse mortgage can take some time but there is a specific process that you have to follow to ensure that it proceeds successfully.
Here are the three steps you need to follow in order to sell your home:
1. Speaking to your servicer
The first step may seem obvious but you need to ensure that you have spoken to your loan servicer in order to make sure that the maturity on the loan has been triggered.
This date can be when an offer is accepted or when the property is first put up for sale. Once this has been done, the plan will be set in motion and you can move onto the next step.
2. Selling your house fast
Once you have gained approval from your servicer, you need to make sure that you are prepared to sell your home quickly. This is so it can all occur in the timeline your servicer has provided.
However, bear in mind that just because you have to sell your house quickly that you have to accept the first offer that is made.
Whether you have an amount in mind or want to apply different techniques to sell your house, you can source advice from your servicer as well as other mortgage advisors in order to boost your profit potential while ensuring that the property is sold within the allotted time.
3. Paying off your balance or setting up repayment plans
Once your property has been sold then you’ll need to decide whether to pay off your balance immediately or set up a repayment plan. The likelihood is that you already have an idea of what route you wish to take and may have already discussed this with your servicer.
Depending on the terms and conditions that your servicer will have presented to you, you may be able to get an extra 6 months to make your payment in order to help you get on top of your payments.
If you are planning to sell your home using a reverse mortgage then there are certain factors you need to consider. The main one is in regards to the value of the property.
If you sell your property and it has increased over time in value then you’ll be able to pay off your debt with no problem due to the amount of equity you will receive.
However, if your property has been determined to be valued at a much lower price than what you owe then there may be complications as you will still be in debt following the sale.
The equity you owe will be given to the servicer and you will have less money leftover from the sale.
Overall, you can sell a property using a reverse mortgage but it is important to make sure that you read the agreements that the servicer has put in place in the contract and that you are not planning to use it as a loophole to prevent making any payments.
The process does follow strict instructions but the more you follow the rules and provide everything that the servicer asks of you then the better your experience will be and the more likely you are to have your reverse mortgage approved.