What happens to the equity in a reverse mortgage home if it is sold? Read here to find out what will happen to your home equity!
One of the largest concerns that reverse mortgage borrowers have is what happens to their home equity after their home is sold. After the home is sold the equity in the home could be handled in a variety of ways depending on your circumstance.
Loan will be Repaid
The first thing that will happen to the equity in a reverse mortgage home after the home is sold is that the loan will be repaid. Reverse mortgages are secured by the borrower’s primary residence. Therefore, if the home is sold the borrower will be required to use the proceeds from sale to repay the existing loan balance. The existing loan balance will equal the original principal balance that was borrowed plus any interest that has accrued on the loan.
Remaining Balance will be Kept
The first thing that will happen to the equity in a reverse mortgage home after the home is sold and the loan is repaid is the remaining proceeds will be kept by the homeowner. The amount given to the homeowner will also be net of any additional property taxes, fees, or credits that the seller needs to pay at closing. If the sale occurs after the death of the homeowner then the remaining proceeds will go to the homeowner’s heirs.
No Money will be Due
In a situation when the equity in a reverse mortgage home is not enough to pay off the existing loan balance, the borrower or their heirs will not be held liable for the additional amount due. In a situation when the home is worth less than the balance due, the bank will be required to write off the remaining balance as a loss.
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