Despite the non-borrowing spouse policy changes that went into effect earlier this week, some reverse mortgage questions are still left unanswered, according to a Fox Business article.
The new policies, effective Monday, Aug. 4, protect non-borrowing spouses by allowing them to stay in their homes without fear of foreclosure as long as certain guidelines are met, and by making reverse mortgages available to couples even if only one of the spouses is 62 or older.
Though these updates deal with the topic of non-borrowing spouses when it comes to a married couple that only names one person on the loan/deed, some question how reverse mortgages will work when a borrower gets remarried.
In a letter to certified financial planner Don Taylor, a reverse mortgage borrower says her husband has passed away and she is considering remarriage. When consulting the bank that has her mortgage, she was told if she got remarried she would be unable to add her new husband to the mortgage/deed and that she would not be able to refinance the reverse mortgage.
However, refinancing the reverse mortgage to accommodate the remarriage is possible, Taylor says.
“Just because your lender won’t refinance doesn’t mean you can’t refinance your reverse mortgage and put your new husband on the deed and the loan,” Taylor says. “The problem here is in paying up for a second round of closing costs on the refinancing.”
One alternative is to buy an insurance policy with the original reverse mortgage borrower as the insured and the new husband as the beneficiary, with a death benefit large enough to cover paying off the mortgage, which the borrower could will to him should she predecease him.
An insurance solution, though, may be more expensive than refinancing, Taylor notes.
Another alternative would be for the husband to get a conventional mortgage at the time of the borrower’s passing to pay off her reverse mortgage. Payments would likely put too great a strain on his retirement income, but if that’s not the case, this option should be considered.
To read the full Fox Business article, click here.
Written by Emily Study