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Don't Let a Reverse Mortgage Leave You Homeless
by Gary Foreman
Understanding Reverse Mortgages
Reverse Mortgage for Home Maintenance
You're considering a reverse mortgage. But, you have concerns that the surviving spouse could be kicked out of their home. Could a reverse mortgage leave you homeless?
To help us understand reverse mortgages and how to avoid problems, we contacted Annie Doisy. She's a reverse mortgage expert and writes for ReverseMortgages.com.
Q: Suppose that the house is titled in one partner's name. Must a reverse mortgage be in that person's name only? Or can both of them be on the mortgage?
Ms. Doisy: The spouse whose name is not on the title to the home is considered a non-borrowing spouse. They are not a co-borrower and will not be able to draw on the funds from the reverse mortgage. They do, however, have the right to remain in the property if the spouse who had the reverse mortgage passes away. The non-borrowing spouse change that occurred on August 4, 2014 made certain that all spouses are protected, regardless of how the home is titled. The amount of money that a person can obtain from the home is dependent on the youngest borrower's age to help make certain that there are sufficient equity reserves throughout the life of the loan.
Q: Is there a way for someone, who is not on the home's title, to be sure that they can stay in the house even if their partner dies?
Ms. Doisy: Yes, if they were married to the partner at the time of closing. As long as the marriage is indicated in the reverse mortgage process, the HECM (Home Equity Conversion Mortgage) will go into a deferment period to allow the spouse to remain in the home after the borrower's death. If someone, who is not the spouse, lives in the home, they will not be provided the same protections.
Q: Can a surviving spouse be added to the reverse mortgage after their mate passes?
Ms. Doisy: No, they cannot be added to the same reverse mortgage. They retain all rights that they otherwise would, so they could refinance into a new mortgage if they wanted or sell the home at any time to satisfy the reverse mortgage balance.
Q: If a surviving spouse is not on the reverse mortgage, how long can they remain in the house?
Ms. Doisy: As long as they remain current on homeowner's insurance, real estate taxes, and home maintenance, there is no time limit on their stay in the home.
Q: Is there any way that the surviving spouse who wasn't listed on the mortgage could be liable for debts to the mortgage company?
Ms. Doisy: After the borrower passes away, the balance of the reverse mortgage is still due. In the deferment period, if the non-borrowing spouse chooses to live in the home, interest will continue to accrue on the balance of the loan. When the reverse mortgage becomes due and payable and the deferment period is no longer active, the balance of the reverse mortgage will be due or 95% of the home's value, whichever is less.
Annie Doisy is a reverse mortgage expert who helps seniors enhance their lives by taking advantage of the equity in their homes. Annie creates retirement and personal finance content to inform homeowners on how to access the equity in their homes.
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter or visit Gary Foreman on Google+. Gary is also available for audio, video or print interviews. For more info see his media page.
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