What is the difference between an eligible and an ineligible spouse?
Great Question! Firstly, it’s not an eligible or ineligible “spouse”, but eligible and ineligible non-borrowing spouse.
A non-borrowing spouse is one who is not going to be on the loan because they do not meet the HUD criteria to be a HECM borrower.
The eligible or non-eligible determination is whether or not they will be granted a deferral on the due and payable status when the borrower on the loan passes.
The reason we usually see a non-borrowing spouse is because the spouse is not yet 62 years of age and every reverse mortgage borrower under the HUD program must be at least 62 years of age and in that case, if they meet the other criteria, they would be an eligible non-borrowing spouse for loans closed now.
However, prior to the time HUD changed their rules in 2014, spouses of borrowers who were not on the loan when the loan was originated had no rights to remain in the home after the borrower passed.
HUD changed that rule though and that change was announced in 2014, effective in early 2015.
Eligible = Protected for Deferral
Now spouses who are not on the loan at the time the loan is originated are either deemed eligible to receive a deferral when the borrowing spouse passes or ineligible based on several items.
An eligible non-borrowing spouse cannot access the loan after the borrower passes if there are still funds available on the line, but an eligible non-borrowing spouse can stay in the home for as long as he or she desires as long as they meet the eligibility criteria.
The eligible non-borrowing spouse must secure title to the property within 90 days of the passing of the borrower.
We recommend that borrowers add the non-borrowing spouse back to title as soon as the loan closes so that there are no problems later.
If it is done while both spouses are still alive, it is easier, there is no probate period and you do not have to worry about meeting the HUD 90 day rule later.
To be eligible, you must be married and living in the home at the time the loan closes and still living in the home as your primary residence at the time the borrowing spouse passes.
And finally, the non-borrowing spouse has the same responsibilities as the borrower with respect to the fact that he/she must pay the taxes and insurance on time and maintain the home in a reasonable manner.
An eligible non-borrowing spouse who does this can stay in the home for as long as he/she lives and wants to remain.
Ineligible = No Deferral Granted
Ineligible non-borrowing spouses might be those who don’t occupy the property (separated borrowers who do not live in the home), were not married to the borrower at the time the loan was closed, or because of familial or other issues cannot get title to the home, (perhaps the home goes to other heirs upon the death of the borrower).
They would not be eligible for the deferral and therefore the loan would be due and payable upon the passing of the borrower. Hope this helps.
Do both spouses need to be 62 for a reverse mortgage?
In most instances the answer is no. Recent HUD rule changes implemented a deferral option for eligible Non-borrowing spouses.
This deferral option allows a non-borrowing spouse to remain living in the property even if the eligible borrowing spouse predeceases them.
Previously the non-borrowing spouse would have to pay off the reverse mortgage or potentially move out of the home.
Non-HUD insured reverse mortgages do not allow for deferral periods and certain states such as Texas do not permit a non-borrowing spouse on a reverse mortgage loan.
Can my new spouse be added to my Reverse Mortgage?
No. If you obtained a reverse mortgage loan prior to your current marriage, your new spouse cannot be added to the loan.
The only way to protect your new spouse with a reverse mortgage is if you refinance to a new loan that would consider both of your ages in the calculations.
If you add your new spouse to title, that does not alter the terms of the existing reverse mortgage and therefore there would be no deferral for your spouse because they were not accounted for on the original loan.
What happens if a spouse dies with a reverse mortgage?
What transpires upon the death of one spouse will depend upon several factors including how the loan was set up initially, who was a borrower, and under what guidelines were in effect at that time.
If both spouses were borrowers on the loan, and one spouse is still living in the property after the passing of the other spouse, nothing happens on the loan as the reverse mortgage would not become due and payable until the passing of the last surviving spouse.
If the spouse who passed away was the only eligible borrower and the surviving spouse was an ineligible non-borrowing spouse or if the loan was taken out prior to the deferral option being implemented by HUD, the loan would become due and payable.
If the surviving spouse was an eligible non-borrowing spouse and remained eligible, they can contact their loan servicing and opt for the deferral option and the loan would remain in good standing allowing the surviving spouse to remain in the property for the duration of their lifetime.
What is an eligible non-borrowing spouse?
An eligible non-borrowing spouse is an individual who is married to a reverse mortgage applicant who is not going to be a borrower of that loan but is living in the subject property as their primary residence.
A spouse can be an eligible non-borrowing spouse by choice or due to being under the age of 62.
The eligible non-borrowing spouse’s age is factored into the loan to value calculation on the reverse mortgage loan because of the deferral option that they are eligible for.
An eligible non-borrowing spouse can become ineligible over time if they move out of the property during the period that the reverse mortgage is in place.
This means that it is possible for a spouse to start out as eligible but become ineligible for the deferral over time.
Any non-borrowing spouse (whether eligible or ineligible) cannot access any reverse mortgage proceeds during the borrower’s lifetime or after their passing if they are in the deferral period. Only borrowers of the reverse mortgage loan can access loan proceeds.
What is an ineligible non-borrowing spouse?
An ineligible non-borrowing spouse is an individual who is married to a reverse mortgage application that does not live in the subject property.
Common examples of this are spouses who are separated or who choose to live in separate homes while still being married.
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