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New Reverse Mortgage Ruling - Younger Spouses Protected
Old 01-18-2016, 09:58 AM   #1
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New Reverse Mortgage Ruling - Younger Spouses Protected

I've read a couple of articles showing that younger spouses (spouses who are not yet 62 years old) are now protected by the new Reverse Mortgage ruling.

The old rule - both spouses need to be 62 years old at the time they take the reverse mortgage loan, so they are protected by the ruling to 'live in the house till death'. If only one spouse is 62 and the other spouse is let's say 50 years old, if the older spouse pass away, the younger spouse will need to vacate the house or get kicked out.

The new rule - If one spouse is eligible to get a reverse mortgage (spouse is 62 years old), then even the younger spouse who is not 62 is now protected from getting kicked out in the event the older spouse pass away. I think this is a good deal for spouses with a big age gap. So if your wife or husband is only 45 - 50 years old and you're 62, they are now protected under this new rule.

New Rule: Spouses Not Named on Reverse Mortgages Are Protected From Foreclosure | Nolo.com
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Old 01-18-2016, 10:00 AM   #2
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The new rule - If one spouse is eligible to get a reverse mortgage (spouse is 62 years old), then even the younger spouse who is not 62 is now protected from getting kicked out in the event the older spouse pass away. I think this is a good deal for spouses with a big age gap.
Seems to me, though, that this would result in substantially lower cash payouts to a couple where one of the spouses is significantly younger than 62.
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Old 01-18-2016, 10:22 AM   #3
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This is good news but in general I think reverse mortgages are a bad idea.


Can they still sell a reverse mortgage that's in the name of the older spouse only? I remember reading one sad story about a younger wife whose late husband took out a reverse mortgage on their house. They were told that (naturally) they'd get more $$ if only his name was on it. He died first and now they're trying to evict her.


If that's no longer permitted, it will reduce the $$ a couple can get from a reverse mortgage (due to longer expected time till both spouses die or move into assisted living) but at least it will also keep the younger spouse from being evicted if the older spouse dies first.
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Old 01-18-2016, 11:07 AM   #4
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I'm not sure if the amount changes, because its based mostly on 60/40 to 50/50. Essentially, you can get up to 50% - 60% of the home's equity. And the new ruling has improved in terms of lowering the fees and insurance premiums. From what I've read, couples are able to get more now than the reverse mortgage of 10 years ago.

Although I don't like reverse mortgages and would rather downsize, it's like a 'back up plan' for some retirees who are house rich and cash poor, or for those who would never like to move again somewhere. It's an option in a worst case scenario.

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This is good news but in general I think reverse mortgages are a bad idea.

If that's no longer permitted, it will reduce the $$ a couple can get from a reverse mortgage (due to longer expected time till both spouses die or move into assisted living) but at least it will also keep the younger spouse from being evicted if the older spouse dies first.
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Old 01-18-2016, 04:39 PM   #5
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Although I don't like reverse mortgages and would rather downsize, it's like a 'back up plan' for some retirees who are house rich and cash poor, or for those who would never like to move again somewhere. It's an option in a worst case scenario.
Even then I think it's a bad idea. FIL is a good example. He owned a nice home that later sold for $268k and it was paid off, but his income was just under $20k/year. His health was declining and we were looking at options, at the time he would have been fine in an independent living apartment but we could see that probably wouldn't last long so were looking for a continuous care retirement community (CCRC) that he could afford.

Oh, and he couldn't drive anymore, couldn't afford the maintenance on a car and since we strongly felt he was unsafe driving we certainly weren't going to pay it for him.

At one point one SIL suggested a reverse mortgage to allow him to stay in the house longer, which he very much wanted to do. DW and I thought that was a very bad idea since it would drain away his equity that he would almost certainly need later for a CCRC.

Later on his heath declined further and he needed to move to the CCRC and we lucked out and found a good one nearby that had just opened a new building, eliminating a five-year wait list and had a dozen openings remaining.

Had he done the reverse mortgage, plus the expenses of long deferred maintenance and upgrades to the house, he would not have qualified for that CCRC, and he was quickly running out of viable options.

So my take on it is this: If the person has to take out a reverse mortgage to stay in the house they can't afford the house and they need to sell it while they still have options. If they don't, they'll still have some options but they'll be a lot fewer and not very good ones.
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Old 01-19-2016, 06:57 AM   #6
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My mother and father took out a reverse mortgage and this allowed them to travel and enjoy life in ways they might otherwise have not been able to afford, while still living in an area where they knew their neighbors and had a viable social support network. Though mom died at 78, Dad lived until 91 and I believe the reverse mortgage allowed him a finer quality of life than if he had sold the house and moved somewhere else. I was happy to see him take money out of an appreciated asset to use as he wished, while still enjoying the comforts and convenience of his neighborhood. Were there high fees and other costs associated with this mortgage? Sure. But you only live once and you can't take it with you!
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