Eligibility for a Reverse Mortgage is based on your property value and the age of the youngest borrower. The older you are, the more eligibility you have to access your home equity. Reverse Mortgages are an attractive way for retirees and active adults to pay off mortgages, gain access to cash, and supplement their retirement income. However, the risk comes to bear when people get greedy.
A classic example of risk would be for a couple to remove the younger spouse from the equation. Now we have a non-borrowing spouse. This will immediately allow for a higher level of eligibility and more available benefits, but when you remove the younger spouse under the HECM Reverse Program, they are not only removed from the loan but FHA requires them to be removed from the deed as well. This creates a major problem when the borrowing spouse dies.
Upon the death of the borrowing spouse, the Reverse Mortgage comes due. This leaves the non-borrowing spouse in a very difficult predicament that could have easily been avoided by keeping them on the loan and the deed. Under more constructive circumstances with both spouses on the loan, the passing of one spouse would have no adverse effects on the surviving spouse and the benefits of the loan would continue.
To summarize, the best practice is to avoid the risk of a non-borrowing spouse scenario all together. The homeowners will get less up front but potentially much more over the long term and the surviving spouse will never be at risk of losing their home. Why gamble when the benefits of a HECM Reverse Mortgage last as long as you live, provided you maintain your home as your primary residence, pay your taxes and insurance, and maintain it. Play it safe.
If you would like to learn more about the benefits and security a HECM Reverse Mortgage can provide, I would like to hear from you.
George H. Omilan