The HECM program allows eligible seniors to obtain reverse mortgages that are insured by the Federal Housing Administration (FHA). To qualify for this special form of financing made available through the U.S. Department of Housing and Urban Development (HUD), mortgagees must be at least 62 years old with considerable equity in their home, and the property must meet HUD standards. Find out how much you qualify for with our free reverse mortgage calculator.
In some cases, a married couple may apply for a reverse mortgage with only one spouse listed on the property title and as the only borrower while the other partner is listed as a “non-borrowing spouse”. Usually, when the last borrower of a reverse mortgage passes away or the loan becomes due, anyone who lives on the property but is not listed as a borrower is required to leave when the home is sold. However, HUD has recently (2014-2017) taken steps to ensure non-borrowing spouses of reverse mortgages borrowers are protected. Eligible non-borrowing spouses may receive a deferral period in order to remain in the home and avoid the loan becoming due.
To read more about eligible versus ineligible non-borrowing spouses and the protections they have with a reverse mortgage, click on a link below.
Guide to Non-Borrowing Spouses in a Reverse Mortgage
In order to clarify the non-borrowing spouse definition and what it could mean for your situation, read through some of these most frequently asked questions about reverse mortgages.
What does non-borrowing spouse mean?
The definition of a non-borrowing spouse is stated within Mortgagee Letter 2014-07 guidelines which explain that a “‘Non-Borrowing Spouse” is defined as the spouse, as determined by the law of the state in which the spouse and mortgagor reside or the state of celebration, of the HECM mortgagor at the time of closing and who also is not a mortgagor.”
In most cases, a spouse is excluded from the reverse mortgage because they do not meet the age requirement (62). They may still be included on the loan as a non-borrowing spouse, which may be a wise choice for couples who’d like to obtain a reverse mortgage as soon as possible, but there are other reasons a couple might have a situation with a non-borrowing spouse including:
- Prenuptial agreements
- Remarried homeowners who would like to leave their estate to their biological children
- Legal liabilities
- Homeowners who do not intend to stay married or jointly occupy the home as the Principal Residence
If one spouse is not listed as a borrower, the HUD mandate grants lenders the ability to defer foreclosure for non-borrowing spouses who meet certain requirements for case numbers assigned on or after August 2014. According to these guidelines, “qualified” non-borrowing spouses are eligible to remain in the home after the borrower has passed, so long as they were married at the time of the application and continue to keep up with the obligations of the loan. The updated HUD non-borrowing spouse definition was designed to safeguard borrowers and protect the safety of the HECM program as a whole.
Getting Started with Reverse Mortgages
If you’re looking to get started with a reverse mortgage, these articles can help guide you through all aspects of the process.
What’s the difference between an eligible and ineligible non-borrowing spouse?
Mortgagee Letter 2015-02 outlines several conditions that would make a non-borrowing spouse eligible to live in the home following the death of the borrower. When the last surviving borrower passes away, the reverse mortgage loan enters a deferral period in which the loan proceeds are frozen. The lender won’t try to collect on the loan during the deferral period* so long as the eligible non-borrowing spouse meets the following requirements:
- Is married to the borrower at the time of the loan closing and remain married to the borrower for the entirety of his or her lifetime
- Is listed specifically as a non-borrowing spouse within the HECM documents
- Proves that he or she has the legal right to reside in the property within 90 days of the borrower’s passing
- Occupies and continue to occupy the home as the Primary Residence
- Adheres to all other HUD requirements by paying property taxes, home insurance, and maintenance expenses
Note: Spousal rights are not transferrable. If a borrower divorces their spouse after closing a reverse mortgage and then later remarries, the first spouse loses their rights under HECM, but the second spouse cannot be added to the loan file. Similarly, if the spouse marries a borrower after he or she takes out a HECM, the non-borrowing spouse will not be eligible to remain in the home.
*The state of Texas does not offer deferral periods for non-borrowing spouses.
Essentially, eligible non-borrowing spouses occupy the home, are protected by “due and payable” deferral provisions, and have their age included in the reverse mortgage calculation of the borrower’s principal limit.
Ineligible non-borrowing spouses, alternatively, do not occupy the home, are not protected by deferrals, and do not impact the borrower’s principal limit.
Consumer Finance warns that if you are an ineligible non-borrowing spouse in a home with a reverse mortgage, you may not be able to keep the home without repaying the loan. However, your lender may allow you to apply to HUD to remain in the home after the borrower dies. You can contact your lender directly and request they receive approval for you, but you must meet certain conditions within specified time frames and HUD must accept your application based on the requirements of HUD’s rule, “Mortgagee Optional Election” (MOE).
Do you both have to be 62 for a reverse mortgage?
Reverse mortgage eligibility requirements state that borrowers must be at least 62 years old to qualify for the HECM program. However, if you’d like to take out a reverse mortgage and meet the age requirement, but your spouse does not, you can still obtain the loan by having your partner file as a “non-borrowing spouse”. Bear in mind that the principal limit of a reverse mortgage will be based on the age of the youngest mortgager or non-borrowing spouse, whichever is less. To read more on the different options for reverse mortgage non-borrowing spouses, take advantage of the resources offered by NewRetirement.com.
Can a non-borrowing spouse be on the title?
Historically, if a partner younger than age 62 is listed on the title of the home, their name had to be removed for the eligible borrower to receive the reverse mortgage loan. However, HUD made changes to the HECM program in their 2017 final ruling, titled “Strengthening the Home Equity Conversion Mortgage” which reversed this rule.
In one of over 50 mandates, HUD now allows non-borrowing spouses to remain on the title, even if they do not qualify for the loan. This removes the need for non-qualified spouses to come off the title before a couple can obtain a HECM.
Can I still live in the home if my spouse dies or moves into a nursing home?
If both spouses meet the qualifying age of 62, it’s a good idea to make sure each spouse is listed as co-borrowers during the reverse mortgage application process. That way, in the event that one spouse dies or moves into a care facility, the surviving co-borrower may continue to live in the home and receive money from the loan proceeds, so long as all HUD requirements are maintained.
Eligible non-borrowing spouses listed on the reverse mortgage loan file will be able to remain in the home should the borrowing mortgagee pass away while the loan is still active, so long as they meet the HUD requirements and certify annually that they are the late mortgagee’s non-borrowing spouse occupying the home.
A borrower’s long-term stay in a nursing facility could force the non-borrowing spouse to sell the house to settle the reverse mortgage. If he or she goes into nursing care for 12 months or more, the lender may call the loan due and the non-borrowing spouse would not be able to fulfill the MOE requirement that both partners continually lived in their home as their Principal Residence.
Keep in mind that although eligible non-borrowing spouses may be permitted to live in the home following the death of the borrower, they are not eligible to receive any money from the loan proceeds, including money remaining in a set-aside account.
What happens to a reverse mortgage once the last borrower passes away?
In most cases, when a borrower dies, the reverse mortgage transfers to the co-borrowing spouse and the terms of the loan continue as normal. In the event that the borrower has no spouse, or the last surviving borrower passes, the heirs of the estate will inherit any equity remaining after the reverse mortgage has been paid.
To make sure you, your spouse, and your family all understand how a reverse mortgage works, speak to a GoodLife representative who can answer any questions you may have. We’re committed to helping retirees find solutions to live The GoodLife in Retirement.