FHA will be accommodating younger spouses under the age of 62 this August. Situations where a couple would benefit from a reverse mortgage but one spouse does not happen to be 62 can now be accommodated and allow the non-borrowing spouse to stay in the home, even if the borrower passes away or moves from the home. This is a significant change and will remove a big obstacle preventing some couples from considering a reverse mortgage. For new transactions after August 4th non-borrowing spouses will be able to remain in their homes, provided the following criteria have been met:
- Have been the spouse of a HECM mortgagor at the time of loan closing and have remained the spouse of such HECM mortgagor for the duration of the HECM mortgagor’s lifetime
- Have been properly disclosed to the mortgagee at origination and specifically named as a Non-Borrowing Spouse in the HECM documents
- Have occupied, and continue to occupy, the property securing the HECM as the Principal Residence of the Non-Borrowing Spouse
- Within ninety days from the death of the last surviving HECM mortgagor, establish legal ownership or other ongoing legal right to remain (e.g., executed lease, court order, etc.) in the property securing the HECM
- After the death of the last surviving mortgagor, ensure all other obligations of the HECM mortgagor(s) contained in the loan documents continue to be satisfied; After the death of the last surviving mortgagor, ensure that the HECM does not become eligible to be called due and payable for any other reason.)
The principal limit tables which determine how much a borrower will receive from a reverse mortgage based on age, interest rate and type of reverse mortgage will be updated to reflect the impact of a younger spouse. USA Today had a good article in their “Mortgage and Real Estate” insert last month profiling very happy reverse mortgage borrowers – an “up” story on the proper use of a reverse mortgage. A reverse mortgage is just one “tool” in a retirement plan. Strategically used it can be a blessing. Improperly used it will result in unintended outcomes. Knowing the difference is where I can help. Five highlights to get you thinking.
- Optimize Social Security by being able to defer benefits until age 70.
- Help kids buy a home close – secure a reverse mortgage for the down payment. The kids are going to get the “estate” anyhow and why not now when you can enjoy it.
- Replace the loss of income when one spouse passes away – expenses do not go down.
- The family home is a bit like a “piggy bank” having paid into it for years and years. Maybe it is time for a withdrawal to allow you to live just a little bit more comfortably.
- Reserve funds are hard to come by when you need them.
A reverse mortgage can be completed, proceeds held in reserve and only used if needed. You will be comfortable knowing it is there just in case. I work hard to understand the proper use of a reverse mortgage and would appreciate the opportunity to talk through your situation. Please give me a call. 925-807-1503