Reverse mortgages are being integrated as a staple in long-term financial plans. Used in a comprehensive plan, reverse mortgages make retirement funds last longer. Unfortunately, there is still a lot of confusion for those couples with noticeable age differences. Reverse mortgages are generally carried out when all borrowers are over the age of 62.
Can a couple with a spouse under 62 get a reverse mortgage loan? Is it a smart financial move in this scenario?
If you can! Make an informed decision.
The key is that everyone borrowers You must be 62 or older at the time you take out the loan. The youngest spouse must not have title to the property at the time of loan closing.
Spouses under the age of 62 should have questions about this scenario. The key is to study your situation and see if it makes financial sense to take out a reverse mortgage. HUD has recently made policy changes to protect younger spouses.
If the other spouse dies before the younger spouse, the younger spouse can inherit the home. The reverse mortgage payment date differs throughout the younger spouse’s lifetime. This postponement period must be requested. There are specific aspects of a reverse mortgage when there is a younger spouse (under 62 years of age). Let’s take a closer look.
The aspects
The couple must be married at the time of closing the reverse mortgage. (De facto spouses are recognized as legal in the state where the borrower lives. This applies to same-sex couples if they are recognized as legal in their state).
The youngest spouse must not have title to the property at closing.
Reverse mortgage income is calculated on the youngest spouse.
The non-borrowing spouse may not receive the remaining loan funds after the other spouse dies.
The non-borrowing spouse must establish legal ownership of their home within 90 days of their spouse’s death to qualify for deferral.
The non-borrowing spouse must keep their home as their primary residence.
The non-borrowing spouse must pay property taxes, insurance, partnership owed, and keep their home.
Reverse mortgage debt is only attached to the home. It is not a personal debt of the surviving spouse.
If a reverse mortgage borrower marries after a reverse mortgage has been established, the borrower will need to refinance to add the new spouse to title or to qualify for a deferral.
As long as they do the above, the youngest surviving spouse may be able to continue living in the home for their entire life. The loan will continue to earn interest. They will not receive any more money from the loan. But the repayment of the loan is deferred for life. The exception is if there are warranty repair funds. When those repairs are completed during this ‘deferral period’. Those funds are released.
When does it make sense to get a reverse mortgage with a younger spouse?
The above aspects mean that this plan may not be for everyone. So who does it make sense to and when?
This strategy may make sense for couples who want to be free from mortgage payments.
The proceeds can provide a lump sum of money, regular monthly payments, or act as a flexible line of credit.
It is important to create a budget for life. Be sure to account for any changes in income when one spouse dies before the other. Life insurance, cash flow businesses, and owning other assets can help.
The surviving spouse may not want to stay in the home. The property can be sold if they wish to downsize or move in with the family.
Cash withdrawn earlier can be used to purchase a home or smaller condo. The guidelines require the borrower and non-borrowing spouse to participate in HUD-approved third-party counseling as a safety measure to protect consumers. This occurs before any contract is signed.
Resume
In conclusion; It is possible for couples to take out a reverse mortgage, even if one of the spouses is under 62 years of age. It is important to consider the big picture and determine if this is the optimal strategy for your situation. For many it will be the best move.
It is vital that homeowners understand the loan agreement in its entirety. Know the rules now, make your plan.
