Ins and Outs of Reverse Mortgage Changes
A June 2015 change of regulation governing reverse mortgages (Department of Housing and Urban Development (HUD) and Federal Housing Authority (FHA) ) effectively allows lenders to permit a surviving, non-borrowing spouse to remain in the home, postponing loan repayment until the surviving spouse moves or dies. Under the revised guidelines, To qualify, the original reverse mortgage must have been approved by the Federal Housing Administration prior to August 4, 2014, and the property tax and insurance payments must be up to date. Numerous other conditions must also be met.
Check with you financial advisor about the specifics of reverse mortgages in your personal situation.
Free information about reverse mortgages is available from HUD and counseling is available.
On the website www.hud.gov there is a reverse mortgage calculator and a Frequently Asked Questions section.
It should be noted that a reverse mortgage is not suitable for every family situation.
Make sure you have all the current facts. The rules governing reverse mortgages are complex and there could be a long-term impact on your Estate Plan. Know how each of those regulations impact you, your spouse and your loved ones/heirs.
Rules governing reverse mortgages have changed as recently as this year and in all probability will continue to be ‘refined’.
Currently, the only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage or HECM, and is only available through an FHA approved lender.
Another source of information is www.consumeraffairs.com and through AARP.
Remember to read everything before signing anything. Compare the costs of a reverse mortgage to other alternatives, for example down-sizing to a smaller home.
If you are uncertain, have documents reviewed by your legal advisor.
A Few Special Situations to consider:
You and your spouse both took out a reverse mortgage; your spouse dies and you want to move
You may owe more than your home is valued
You are in poor health
Only your spouse took out the reverse mortgage
You are in a same-sex relationship
Your spouse is much younger (or older) than you
Your NEW spouse has a reverse mortgage (taken out prior to your marriage) and now you both live in the property
You plan to leave your property to your heirs
You own a property that is high value
You plan to move to another state in the future
You may not wish to maintain your home in the future and are considering down-sizing ‘later’
You want flexibility about where you live – for example, moving closer to other family members
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