Have Reverse Mortgages Been Improved?

Have reverse mortgages been improved? YES

Before 2014, if one spouse was under 62, the only way for the primary borrower, age 62 and over, to obtain a reverse mortgage was for the younger spouse to quitclaim off title and have the older spouse obtain the reverse mortgage. For this explanation, assume that the husband is 62 or over and the wife is younger than 62. 

The plan was for the husband to leave the home to the wife in his will and then for both spouses to refinance their reverse mortgage jointly when the younger spouse reached 62. However, life happens. Assume that the husband dies before the wife reaches 62. The younger, surviving spouse was not able to assume the reverse mortgage. She would have to sell or refinance within one year. This gave reverse mortgages a bad name. 

The rules changed in 2014. In that year provision was made for non-borrowing spouses. Read. She can remain on title, although she will not be a signer on the mortgage. 

If the wife in this example is 55 instead of 62, she can enjoy most of the benefits of the reverse mortgage. The wife can continue to live in the home with no required mortgage payments. If she lives to age 95, she will have had no required payments for 40 years.

The reverse mortgage benefit she will not inherit is the ability to take continuing draws from the line of credit. However, when the wife reaches 62, she will be able to refinance into her own FHA reverse mortgage.

When the wife is significantly younger than 62, the couple will be able to borrow less money than if they were both at least 62. Let’s take an extreme example. If the husband is age 74 while the wife is only 46, they will only be able to borrow 41% of the value of the property.

There was further protective clarification in 2019. Read.

And there was additional clarification in 2021. Read.