A reverse mortgage allows you to tap into some of the equity in your home without selling the property or making monthly payments. Available to homeowners age 62 and older, reverse mortgages can provide an additional income stream during retirement. You can apply for a reverse mortgage alone or with a spouse. But what if you live with a romantic partner or roommate? Can cohabitants get a reverse mortgage? Here is a brief overview of reverse mortgages when the co-borrowers are unmarried.
Key points to remember
- A reverse mortgage allows senior homeowners to tap into the equity in their home without moving or selling their home.
- To qualify for a reverse mortgage, you must be at least 62 years old and have considerable equity in your home.
- Married or unmarried couples can be co-borrowers on a reverse mortgage.
- Your surviving spouse or partner who is a co-borrower on the reverse mortgage can remain in the home even if you die or move (for example, to move into an assisted living facility).
- Your children, parents, and other dependents who aren’t co-borrowers — or a spouse who doesn’t qualify as an eligible non-borrowing spouse — must repay the loan to stay in the home if you die or move.
What is a Reverse Mortgage?
Homeowners who are at least 62 years old and have substantial equity in their home may qualify for a reverse mortgage. This loan allows you to convert some of the equity in your home into cash without selling the home or making monthly payments. Instead, the lender gives you an advance on a portion of your home’s equity, either as a lump sum, monthly amount, or line of credit.
You can use the money to pay for expenses such as living expenses, medical bills or home repairs, or even a new home, if you have a HECM loan for purchase. Interest and fees accrue over the term of the loan, which becomes due when you sell the home, move, fall behind on property taxes or die.
Reverse Mortgage Borrower Requirements
Reverse mortgages are designed to help senior homeowners access their home equity, providing a potentially much-needed source of income when they are housing rich and cash poor.
The most widely used reverse mortgage is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA) and issued by FHA-approved lenders. If you apply for a HECM, the lender will verify your income, assets, monthly living expenses, credit history, and timely payment of property taxes and home insurance premiums. Additionally, you must:
Be sure to shop around and compare the costs of the reverse mortgages available to you. Although lenders generally charge the same premiums for mortgage loan insurance, other loan costs, including origination fees, closing costs, service fees and interest rates, vary by lender.
Can unmarried couples get a reverse mortgage?
Anyone can be a co-borrower on a reverse mortgage if they meet the eligibility criteria. This means you can include your spouse, dating partner, or roommate on your reverse mortgage documents.
Either co-borrower can stay in the home without paying anything for the balance of the reverse mortgage if the other co-borrower moves or dies. The loan becomes due when the surviving co-borrower sells the home, moves out, falls behind on property taxes (or defaults on the terms of the loan) or dies.
A spouse or partner who is a co-borrower on a reverse mortgage can stay in the home without being obligated to pay off the balance until they sell the home, move out, or die.
Partners or roommates who are not co-borrowers
A partner or roommate who is not listed as a co-borrower on your reverse mortgage will need to establish their legal right to remain in the home after your death. They will likely have to vacate the property if they are not listed on the title deed, deed, or other property rights documents. Even if they could stay in the house, the reverse mortgage balance would become due, a liability that would fall to your estate or heirs.
Should a spouse have a reverse mortgage?
There is no requirement for both spouses to be included in a reverse mortgage application. However, your spouse may be deprived of certain rights and protections.
For example, if you die and your spouse was not on the original reverse mortgage, they will not be able to withdraw any additional funds and will have to repay the amount borrowed. But they may be able to defer repayment and stay in the house if they maintain the home and keep up to date with property taxes and insurance.
When should I pay off a reverse mortgage?
Reverse mortgages generally become due when you sell the home, move (for example, to live in an assisted living facility), fall behind on your property taxes, or die. Proceeds from the sale of the home can be used to pay off the loan, with the remaining funds going to you or your estate.
What is a disclaimer?
If your reverse mortgage has a non-recourse clause, you (or your estate) cannot owe more than the value of your home when the loan matures and the home is sold. So if you or your heirs want to pay off the loan and keep the house, you won’t pay more than the appraised value of the house.
Co-borrowers on a reverse mortgage do not need to be married or related. You and your partner or roommate can therefore apply together. Of course, both borrowers must still meet the loan requirements and you must have enough equity in the home to qualify.
Keep in mind that the high costs of reverse mortgages make them a poor choice for many homeowners. If you need the money, but are about to get a reverse mortgage, you might want to consider a mortgage refinance, home equity loan, or downsizing your home and use it. extra money to cover living expenses, medical expenses and anything else. .