Not Just A Question Of Age

There are strict age requirements for reverse mortgages. The FHA/HECM (Home Equity Conversion Mortgage) program requires that each homeowner/borrower be at least 62 years of age. The question becomes, what happens if one party is 62 or older and the other is not of reverse mortgage age?

The RIGHT answer to this question depends upon the knowledge of your loan officer. One answer you may get is that it CAN NOT be done. (This is a correct answer) Another answer you may receive is that it CAN be done providing the individual who is not 62 is taken off the title. (This is also a correct answer). So you say, “OK let’s do it”.

I say “not so fast”. While both answers are correct, we need to explore this issue further to determine which answer is RIGHT for our couple. You will discover how important this is as we unravel the consequences that can impact our surviving individual.

Assume for a moment that the younger individual is taken off title and imagine that this individual passes away first. This is a fortunate result in one respect: Since this person was not an owner of the property, the death of that person will not affect the reverse mortgage.

However, if the person who was the owner/reverse mortgage borrower passes first, then the loan becomes due. (The loan becomes due upon sale, death of the surviving borrower, or when the home is no longer the primary residence of each borrower). In this case, when our borrower passes, the loan has to be paid in full.

Usually, when a “maturity event” occurs, the home is sold. The lender receives the unpaid balance. The heirs receive the difference.

Our non-borrowing individual could be placed in a precarious position if their desire is to remain in the home after the death of their partner/spouse.

Therefore it is critical to explore the financial wherewithal of the parties. It is necessary to examine the various scenarios with the concomitant options. And it is important that the parties understand the consequences of their actions.

Being correct is not enough.

Attorney Dennis Haber is the author of the just-published, ground-breaking book, Piggy Bank Your Home: Tap Into The Power Of A Reverse Mortgage.

This entry was posted on Tuesday, February 19th, 2008 at 4:24 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.