I have the home in family trust. I am unmarried but have lived with my “wife” for years. She inherits the home by last will. Do we qualify for a reverse mortgage?
The short answer is yes, you can have your home in a family trust if you have a reverse mortgage.
Firstly, as a lender, we only get so much information and then we do rely on the title and affidavits we receive when originating the loan.
For example, we would do a title search and see that the current title is in the name of your trust and we would get a copy of that trust. We would have a copy of your application that stated you were an unmarried man.
With reverse mortgages there are forms that adult occupants of the property also sign stating that they have no ownership interest in the home and are aware of the transaction. With that documentation there is no problem doing a reverse mortgage loan for someone with your circumstances. Who inherits the home is of no consequence in the making of the loan.
Now, if she does have current ownership interest, then she would have to be considered in the loan and the title would have to reflect her interest as well. Or if you wanted her to also be included in the loan, as long as she is also 62 years of age or older, you can change the title to include her as well and she can also be included on the reverse mortgage, even though she is not married to you.
If she is not yet 62, she cannot be a non-borrowing spouse because she does not meet the qualifications (under 62 but married to the reverse mortgage borrower at the time the loan is originated). Under the parameters you have described, you could obtain the loan in your name alone at this time since you are not married and you obtain sole ownership of the property and nothing would prohibit her from inheriting the home upon your passing.
SO, UNLESS SHE IS ON THE TITLE WHEN I DO THE REVERSE, SHE WILL UNABLE TO STAY IN HOME AFTER MY DEATH?
Trusts & Non-Borrowing Spouses
Unless she is on title or is a bona fide non-borrowing spouse, the loan becomes due when the last borrower or non-borrowing spouse at the time the loan is obtained permanently leaves the home.
Under your scenario, she owns the home when you will it to her and there is nothing that says she has to leave the property, but if she does not have the wherewithal to repay the obligation at that time, then she would have to sell the home to pay off the loan if she was not on title at the time the loan was taken and was not a non-borrowing spouse at that time.
We always coach borrowers that they need to understand the options before they close the loan, not after the time comes when a loved one has passed and now they have to scramble.
Your proactive research will help you greatly so that your significant other is not trying to figure this all out at a time in her life when things are difficult enough. The options are as you stated, either to be 62 or over and on title at the time the loan closes, be a non-borrowing spouse or to make other arrangements in advance if you want to proceed with the reverse mortgage.
Some of the other arrangements that non-borrowing spouses have told us about in the past include a life insurance policy in place to pay off the mortgage at the passing of the older spouse, a second home owned by the couple that the non-borrowing spouse intended to move to at that time or family that the non-borrowing spouse had plans to move in with or closer to upon the passing of the older spouse and plans to sell the home at that time anyway.
Absent a clear plan in advance, finding out after a loved one has passed that you now have an obligation that must be repaid with no means to repay it, forcing a move is a terrible way to proceed.
You really need to decide now if you want to take the steps necessary as outlined above to protect your significant other so that she can remain in the home if that is your and her desire or make the determination that the reverse mortgage does not fit with your plans.
Can you get a reverse mortgage if your property is in a trust?
What are my options if my trust does not meet the guidelines to obtain a reverse mortgage?
Can a property be taken out of a trust before or after I obtain a reverse mortgage?
Can I amend my trust after I get a reverse mortgage?
Can I obtain a reverse mortgage if I am a successor beneficiary of a trust?
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