Selling a house with a reverse mortgage in Arkansas

The title company treats a reverse mortgage like any other lien on the house. It gets the payoff figure, collects the sale money into escrow, pays the loan off, and the releases follow. Our guide on selling a house with a lien covers how payoffs come out of proceeds and what to do when a release never gets recorded, and all of it applies here.

Selling is one of the events that ends a reverse mortgage, because the loan is built to come due when the house changes hands. That is not a penalty and not a default. At closing, the transfer and the payoff happen together, the same as a regular mortgage.

A reverse mortgage is a non-recourse loan. You have no personal liability for the balance. The lender can collect only from the house, and it cannot get a deficiency judgment against you.

If you owe more than the house is worth and the loan is not yet due, federal rules still let you sell. The floor is the lesser of the loan balance or the home's appraised value. The lender orders that appraisal from an appraiser on the federal roster, and while the loan is not yet due, you pay for it. The lender then releases the mortgage so the sale can close, on two conditions that travel together: no other liens sit behind the reverse mortgage, and all the net sale money goes to the lender. A judgment or a second loan behind it takes this shortcut away, and that situation belongs in front of your servicer and a lawyer, not a blog post.

Both versions of the story you may have read are wrong. An underwater owner is not trapped, and there is no rule letting every seller settle at 95 percent of value. That settle-for-less number applies when the loan is due and payable, not before.

The loan comes due when the last borrower dies, or when no borrower lives in the house as their main home. It can also be called due, with federal approval, over a health absence of more than 12 straight months, or unpaid property taxes or home insurance.

After a death, the servicer sends a due and payable notice, and the notice gives the family 30 days to act on one of the listed choices: pay the balance, sell the house, deed it to the lender, or walk away. Walking away costs the family nothing beyond the house, because the loan is non-recourse. If the balance is more than the house is worth, federal consumer guidance says heirs can settle the loan by selling for at least 95 percent of the appraised value. The title side, who signs and how the estate conveys, is our page on selling an inherited house.

If a surviving husband or wife is on the paperwork as an eligible non-borrowing spouse, the due date can be put off while they live in the house. That is a keep-the-house question, and a HUD approved counselor is the right free call.

If the goal is keeping the house, selling is not the answer at all. A loan called due over taxes or insurance can often be fixed and reinstated, even after foreclosure starts, though the lender may refuse in some cases. A HUD approved counselor is free and walks you through it before anything is signed.

If you have real equity and the house shows well, the open market may net you more than any cash buyer. And when a cash sale is the right call, ours works here the way it works everywhere on this site: one walkthrough, a guaranteed cash offer within 24 hours, and a closing in less than 10 days, or on your timeline, with the payoff handled by the title company out of the proceeds.