Reverse Mortgage Vs Selling Your Home
If you are 62 or older, you can stay and tap your equity with a HECM, or sell and move. Here is what FHA’s HECM rules ask of you if you stay, how a later sale or payoff works, and how HECM for Purchase lets you buy a different home with a HECM in a single transaction.
What a HECM requires
Each item below is an FHA rule for a HECM on the home you live in now. A HECM Traditional is the version for tapping equity in your current home.
- Age and residence. Every borrower must be at least 62 as of the closing date, and there is no maximum age. The home must be the principal residence of each borrower, and a borrower may have only one principal residence at any one time.
- Living there most of the year. A principal residence is your permanent home, where you typically spend the majority of the calendar year. Each year the servicer must get your certification that the home is still your principal residence.
- Property charges stay yours. Property taxes, hazard insurance, flood insurance if it applies, ground rents, condo, PUD and HOA fees, and special assessments are your obligations. If HECM proceeds are not enough to pay them, you must pay all of them, even if you chose to have the lender pay.
- Upkeep and insurance. Insurance is required on all improvements on the property. If the servicer learns the home’s condition has deteriorated, it must give you 60 days to begin repairs. If you do not begin in time, or do not make satisfactory progress, the servicer must follow the due and payable rules.
- Long absences. A stay in a health care institution does not end your principal residence status as long as it does not exceed 12 consecutive months. You should tell the servicer about any absence from the home longer than two months.
- When the loan can come due. With HUD’s approval, the loan can be called due if no surviving borrower keeps the home as a principal residence, a borrower is away more than 12 consecutive months because of physical or mental illness and no other borrower lives there, or any borrower obligation is not met.
Be 62 at closing
Make it your main home
Keep paying property charges
Insure and repair the home
Report long absences
Know what makes it due
Selling A HECM Home
Choosing to stay now does not rule out selling later. FHA’s HECM rules let you sell the home or pay off the loan early.
Under the terms of the HECM, you may sell the home at any time. You can pay the loan back in whole or in part without penalty, and partial prepayments are allowed at any time. HUD counts a sale of the home by the borrower as a prepayment in full, and once a HECM is prepaid in full, it is terminated.
For a pending sale, the servicer must have the home appraised by an FHA Roster Appraiser no later than 30 days after the request. If the loan is not due and payable, the appraisal is at your expense. If the loan becomes due and payable, a separate HUD sale rule applies. When HUD approves calling it due for a reason other than death, the notice you receive gives you 30 days to say whether you will pay the loan in full, sell the home under HUD’s sale rule for loans that are due, give a deed in lieu of foreclosure, or fix the problem.
If you would rather sell and move, HECM for Purchase is designed to let you finance a new principal residence and obtain a HECM within a single transaction. If you already have a HECM on your current home, it must be paid off before the HECM for Purchase loan can be insured. Our HECM for Purchase page covers that program in more detail.
Why weigh both with Saxton
This page is for homeowners 62 and older, and their families, deciding whether to stay with a HECM or sell. The homeowner makes the decision.
One Transaction To Buy
HECM for Purchase lets you finance a new principal residence and get a HECM in a single transaction. Title must transfer to you, and only the HECM liens may be against the home at closing.
Move In Within 60 Days
With HECM for Purchase, every borrower, and an eligible non-borrowing spouse if there is one, must occupy the new home within 60 days from the date of closing.
Your Own Funds Are Required
On a purchase you must provide funds to cover the difference between the HECM principal limit and the sale price, plus any HECM fees not financed, minus your earnest deposit. Cash from selling assets is an acceptable source.
Keep Some Funds For Later
On an adjustable-rate HECM, you may choose to put in a larger amount of your own money so that part of the available HECM proceeds stays available for future draws. A fixed-rate HECM pays one lump sum at closing with no later draws.
Choose How You Draw
If you stay, FHA’s HECM rules offer six payment plans. On an adjustable-rate HECM you may change plans at any time if funds are available, including a line of credit you draw from at times and in amounts you choose.
Seller Fixes Safety Issues
On a purchase, repairs for major deficiencies that threaten health and safety or the soundness of the home must be completed by the seller before closing. A repair set-aside is not permitted.
Hear From Homeowners Like You
Frequently Asked Questions
Straight answers for homeowners weighing a HECM against a sale.
Yes. Under the terms of the HECM, you may sell the home at any time. HUD treats a sale by the borrower as a prepayment in full, and a HECM prepaid in full is terminated.
No. The servicer must accept a prepayment of a HECM in whole or in part without penalty, and it must allow a partial prepayment at any time.
Yes, through HECM for Purchase. It can finance a one- to four-unit home that will be your principal residence. The home may be existing or new construction, and eligible types include site-built homes, condo units in approved projects and manufactured homes. You must move in within 60 days from the date of closing.
You may have only one principal residence at a time. If you plan to sell your current home and use HECM for Purchase for a new one, the existing HECM must be paid off before the HECM for Purchase loan can be insured.
Yes. You must provide funds to cover the difference between the HECM principal limit and the sale price, plus any HECM fees not financed, minus your earnest deposit. Acceptable sources include cash on hand and cash from the sale or liquidation of your assets. Sweat equity, trade equity, rent credit and premium pricing cannot be used.
A temporary stay in a health care institution does not end your principal residence status as long as it does not exceed 12 consecutive months. If a borrower is away more than 12 consecutive months because of physical or mental illness, and no other borrower lives in the home as a principal residence, HUD may approve calling the loan due.
Counseling with a HUD-approved HECM counselor comes first. Our program processes the initial HECM application only once counseling is complete, as shown by the signed and dated counseling certificate. Everyone on title must attend counseling.
Find out what you qualify for
Tell us about your home and what you are weighing, and we will go over both paths with you before you schedule counseling.
Get Pre-Qualified- U.S. Department of Housing and Urban Development, FHA and housing resources
- U.S. Department of Housing and Urban Development, FHA mortgage insurance premiums
Loan amounts, rates, terms, and eligibility are subject to credit approval, asset and income verification, appraisal, and program guidelines. Program availability varies by state. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.