Beware: Younger Spouses and Reverse Mortgages
Couples in which one partner is much younger than the other have a couple of issues – reverse mortgage eligibility depends on the age of the younger partner (both must be over 62) and the amount you can borrow depends, in part, on the age of the younger partner. This causes some couples to consider removing the younger one from the home’s title before borrowing.
Do this with great caution!
When the borrowing spouse dies or leaves the house (to separate from the other partner, perhaps, or enter a hospice program), the loan becomes due and payable. If you do not plan for this, the non-borrowing partner could end up being evicted from the family home – even in a community property state.
Couples may be advised that the loan is assumable by the non-borrowing spouse if the elder dies. Not all attorneys, accountants and other pros understand the ins and outs of this product. However, HUD-approved reverse mortgage counselors should be able to give you the facts. In some cases, lenders have indicated that it’s a simple matter to add the younger spouse back to the home’s title and the reverse mortgage when he or she is older. That is also not true – the only way to do this is by refinancing your reverse mortgage, incurring reverse loan fees again. This shows how important reverse mortgage counseling can be, and why you should get it even if you get a private reverse mortgage and counseling isn’t required by law.
Anyone other than the borrower on the HECM is considered a “tenant” according to HUD’s rules – that includes the non-borrowing spouse and any other people living in the home, like children and grandchildren.