Reverse mortgages1 are a type of loan that allows homeowners aged 622 or older to convert a portion of their home equity into cash. The loan is repaid when the borrower dies, sells the home, or moves out3. In the case of married couples, both spouses must be at least 622 years old to qualify for the loan. If one spouse is younger than 62, they can still be included in the loan as a non-borrowing spouse.
There are two types of non-borrowing spouses: eligible and ineligible. An eligible non-borrowing spouse is an individual who is married to a reverse mortgage applicant at the time the loan closes and is living in the subject property as their primary residence. If the borrowing spouse passes away, the non-borrowing spouse must continue to meet the criteria for a reverse mortgage, such as staying up to date on property taxes and homeowners’ insurance and keeping the house in good shape. The non-borrowing spouse will not be able to draw any additional funds from the loan, whether from a line of credit or tenure or term payments. The home must be and remain the non-borrowing spouse’s principal residence. New reverse mortgage laws that took effect in September 2021 offer better protections than ever to eligible non-borrowing spouses.
An ineligible non-borrowing spouse is a spouse who is not included in the loan at the time the loan is originated. Ineligible non-borrowing spouses are not protected by deferrals and do not impact the borrower’s principal limit. If you are an ineligible non-borrowing spouse in a home with a reverse mortgage, you may not be able to keep the home without repaying the loan when the borrowing spouse passes away or moves out of the home.
Note that these rules apply to the HECM reverse mortgage. Proprietary reverse mortgage programs vary on the issue, but generally non-borrowing spouses do not enjoy continuing benefit once the borrowing spouse passes. The reverse mortgage becomes due and payable at that time.
In summary, eligible non-borrowing spouses are protected by new HECM reverse mortgage laws that offer better protections than ever before. Ineligible non-borrowing spouses, on the other hand, are not protected by deferrals and may not be able to keep the home without repaying the loan. It is important to understand the difference between eligible and ineligible non-borrowing spouses when considering a reverse mortgage.
Footnotes and Estimated Posting Dates:
1 See HECM Defined.
2 See HECM and Proprietary Products Differences and Similarities.
3 See What To Do When the Loan Comes Due. (7/30/24)
