Marrying Someone Who Has a Reverse Mortgage

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Marrying Someone Who Has a Reverse Mortgage

Using their home equity as a source of income, homeowners may access their equity via an unique kind of loan known as a reverse mortgage. The homeowner gets monthly payments or a lump sum payment from the reverse mortgage firm instead of making payments to a lender.

For qualified borrowers, this kind of arrangement might provide extra income, but it’s crucial to comprehend how it can effect you if you become married to someone with a reverse mortgage.

Key Takeaways

  • With a reverse mortgage, qualifying homeowners may access the equity in their houses without having to pay a lender on a regular basis.
  • Home equity conversion mortgages are reverse mortgages that must adhere to Federal Housing Administration (FHA) regulations (HECMs).
  • If you marry someone with a reverse mortgage, it may be harder for you to stay in the house if they leave or die away.
  • If the borrower spouse has a life insurance policy, you may be able to utilize the proceeds to repay the reverse mortgage in the event that they pass away.

Reverse Mortgage Basics

With a reverse mortgage, a homeowner may borrow money and use the equity in their property to pay monthly expenses. Reverse mortgages may collect interest and fees, but as long as the borrower uses the property as their primary residence, no payment is necessary. This is distinct from a home equity loan, which calls for periodic payments from the borrower to the lender.

If the borrower undertakes any of the following, payment on the reverse mortgage debt would be necessary:

  • Sells the home
  • no longer resides there as their primary home
  • Dies

Home equity conversion mortgages are reverse mortgages that adhere to Federal Housing Administration (FHA) regulations (HECMs).HECM eligibility requirements are quite strict and must be satisfied. Generally speaking, if you satisfy all of the following criteria, you may get a HECM:

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The same factors that lenders take into account when approving any other sort of house loan include yearly income, credit scores, and credit history.

Not only are single-family houses eligible for reverse mortgages. If the borrower resides in one of the units, they may also be utilized for multifamily housing, such as duplexes, triplexes, and quadplexes.

Marrying Someone Who Has a Reverse Mortgage

In the event that you subsequently divorce or your new spouse dies away, marrying someone who has a reverse mortgage on their house may provide some challenging situations. You would neither be included as an eligible non-borrowing spouse nor labeled as a co-borrowing spouse since the reverse mortgage was already in place when you were married. This implies that even though you could inherit the home if your spouse goes away, if you wish to retain the house, you would have to pay off the reverse mortgage in full.

You might choose from one of three options if you don’t have enough cash on hand to cover the balance:

  • Convert the reverse mortgage into a standard mortgage loan that is just in your name.
  • Get your own reverse mortgage and utilize the money from it to pay down the current reverse mortgage.
  • Sell the house and pay off the loan with the revenues.

You would need to decide which of the first two possibilities made the most sense for your financial circumstances if you wanted to stay in the house. Should you start making mortgage payments to pay off the debt right away? Should you take care of the debt now or leave it to your heirs (or your spouse’s heirs) later?

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Keep in mind that if you refinance a reverse mortgage into a new house loan, you will have lifetime payments to make. Do you have the means to pay for that? You’ll end up losing the house if you attempt and fail.

You and your ex-spouse would need to sort out the details of how the reverse mortgage debt is to be paid and by whom if you are divorced and get the house as part of your settlement.

Life Insurance for Reverse Mortgages

You may be able to provide some financial security for yourself if you’re marrying someone who already has a reverse mortgage in place by getting a life insurance policy. For example, if your spouse were to pass away, you might get a life insurance policy for them that would cover the remaining amount of the reverse mortgage. This would guarantee that you could remain in the house.

Consider whether term or permanent life insurance makes more sense when evaluating your alternatives, as well as how much you would spend for each depending on your spouse’s age and health. Although term life insurance is often less expensive than whole life insurance, a person in their 60s or 70s may still have to pay substantial premiums. Additionally, think about if your spouse has any previous illnesses that can have an impact on the kind of coverage they are eligible for.

What Happens to the Spouse When a Reverse Mortgage Borrower Dies?

If the borrower dies, spouses who were already married at the time the reverse mortgage was taken out may be entitled to stay in the house. In order to stay in the house after the borrower’s passing, spouses who married someone who already had a reverse mortgage would need to pay off the remaining sum.

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Can Borrowers Lose Their Home With a Reverse Mortgage?

Yes, if they stop using it as their primary abode. This may occur if they move into a second house they own or are forced to live permanently in a nursing home. In either scenario, paying up the whole reverse mortgage sum would be necessary to prevent foreclosure.

Can Heirs Walk Away From a Reverse Mortgage?

If the borrower dies, the reverse mortgage’s heirs, including spouses, are liable for paying the remaining sum. The only exceptions are spouses who inherit real estate and are listed as co-borrowers on the reverse mortgage or who meet the requirements to be considered an eligible non-borrowing spouse, which means they were married to the borrower at the time the reverse mortgage was obtained but were too young to be a co-borrower at that time.

The Bottom Line

Reverse mortgages may be utilized to augment retirement income, but there are a few key guidelines to be aware of, especially if you’re getting married to someone who already has one. Couples who are recently wed or about to be married and are worried about what might happen to the house if the borrower dies away may want to speak with an estate planning lawyer.

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