New rules for reverse mortgage borrowers’ spouses who are not named on the home title will take effect early next month, and they should provide some peace of mind to married couples who are prospective borrowers, writes Forbes in an article about the changes.
Recapping reverse mortgage basics, Forbes explains the impetus behind changes regarding non-borrowing spouses, namely to prevent the surviving spouse from ever losing his or her home due to the borrower’s passing away.
Consumer advocates have applauded the change.
“The National Council on Aging applauds HUD for taking a leadership role so the most vulnerable seniors, including widows, are well-protected and can stay in their homes as they want,” Ramsey Alwin, vice president of Economic Security for NCOA told Forbes.
The loans are still “pretty complicated financial products,” however, the article notes, pointing to the importance of seeking a second opinion for those who are interested in getting reverse mortgages.
“We advise all potential borrowers who are considering a HECM — and especially those with a spouse under the age of 62 — to consult with a trusted adviser, such as a financial planner, attorney or tax adviser to determine whether a HECM is the right option for their personal financial situation,” Colin Cushman, Generation Mortgage CEO said.
Cushman also demonstrates through an example how the new rules impact a couple when a non-borrowing spouse does not meet the age minimum of 62.
In light of the changes, more financial planners are recommending reverse mortgages, Forbes writes, citing input from National Reverse Mortgage Lenders Association President and CEO Peter Bell.
“Historically, people have looked at them as a loan of last resort,” Bell said. “But increasingly, we’re seeing financial planners publish strategies that show if you deploy a reverse mortgage early as a standby line of credit so you won’t be forced to sell other assets if you need cash, you can manage your wealth more effectively.”
Written by Elizabeth Ecker