What are sale options with a reverse mortgage?

Q: I have a reverse mortgage on my home. Am I allowed to sell my property to pay off the reverse mortgage and keep my equity or do the lenders just get the whole thing? If I die, can my son sell the property and keep any equity? — Donald

A: A reverse mortgage is different from a typical mortgage because you do not need to make monthly payments. Instead, the balance you owe the bank grows each month. The bank is repaid only under certain circumstances, such as your death or if you move to another home.

However, if your home is worth more than the mortgage balance, that extra amount, known as your equity, belongs to you or your heirs. If the balance tips the other way and the loan is more than your home’s value, you or your heirs will have to turn over the house, but will not be responsible for any extra.

You can sell your home now and keep the equity, if you want. If you die, your son, provided he is also your heir, will have a certain amount of time, typically 12 months, to repay the loan in full, usually by selling the home.

If you are concerned about the balance of the mortgage and want to make sure there is equity for your heirs, there is nothing stopping you from making partial payments while you are alive.

Reverse mortgages are not for everyone, but can be a useful tool in the right situation. If you want to continue living in your home with minimal monthly payments, perhaps due to your retirement, a reverse mortgage may be right for you.

Be aware that they tend to have significant upfront costs; it does not usually make sense unless you plan to stay in your home for the long term. Also, remember that while you do not have to make monthly mortgage payments, you are still responsible for paying your association dues, property taxes and homeowner’s insurance.

Board-certified real estate lawyer Gary M. Singer writes about industry legal matters and the housing market at SunSentinel.com/ real-estate each week. To ask him a question, email him at gary@garysingerlaw.com, or go to SunSentinel.com/askpro.