Reverse mortgage loans can be excellent financial tools for homeowners over 62 who have significant equity in their homes. The loan does not become due until the borrower passes away or no longer lives in the home full time.
The home needs to be maintained and borrowers will continue to pay insurance and taxes for their home. For many seniors who are ready to tap into the equity they have built up in their home, a reverse mortgage loan can be the best financial safety net for them.
Historically, the amount borrowers may receive with a reverse mortgage loan varies depending on the value of the home, current interest rates and the age of the youngest borrower. Generally, the older the borrower, the more they will receive. For this reason, many couples choose to only list the eldest spouse on the reverse mortgage.
Previous Rule and Why It Needed Changing
Prior to August 4, 2014, borrowers who took out a reverse mortgage loan in only the oldest spouse’s name often faced difficulty when that spouse either moved to an assisted living or nursing home or passed away. The younger spouse was then left to repay the reverse mortgage, often by selling the home; or possibly facing foreclosure.
Since the older spouse was often times the husband, this left many senior widows facing substantial debt and the aforementioned foreclosure. Consequently, AARP filed a lawsuit against the Department of Housing and Urban Development (HUD), claiming the rule discriminated against women. HUD was successful and had an effect on changing the rule regarding reverse mortgage loan repayment.
New Rules and Impact Moving Forward
Beginning on August 4, 2014, reverse mortgage loans are no longer due when the borrower dies if their spouse still lives in the home, even if that spouse is not on the reverse mortgage. If one spouse has a reverse mortgage and passes away, the surviving spouse may continue to live in the house as long as they continue to pay the taxes and insurance payments, and as long as they maintain the home. “The National Council on Aging applauds HUD for taking a leadership role so the most vulnerable seniors, including widows, are well-protected and can stay in their homes as they want,” says Ramsey Alwin, Vice President, Economic Security for the nonprofit group.1
Possible Downside?
However, the new rule comes with a potential downfall. The amount that a couple may receive from a reverse mortgage loan will be based on the youngest spouse, even if that person is not listed on mortgage’s title. Simply, the younger the person, the smaller the reverse mortgage loan.
To Learn More
Reverse mortgage loans can be beneficial financial resources if a homeowner has enough equity built into the home. If you or someone you know is considering a reverse mortgage loan, call 800-976-6211 for more information. Many seniors are enjoying a better quality of life because of their reverse mortgage loan. Today, even couples where only one partner is 62 years old or older can live at peace knowing both partners will be able to live in the home for as long as possible.