Disclaiming Spouse Works for Reverse Mortgage - But Be Informed
Seniors receive a reverse mortgage loan based on 3 important factors: home worth, borrower age, and the rate of interest. The higher the age of the senior, the higher the loan will be in relation to the opinion of value by a licensed appraiser.
In the very typical situation in which 2 borrowers will be on the loan, the mortgage company discounts the older borrower and only takes into consideration the younger borrowers age.
Since one of the ways a reverse mortgage ends is when the last person on the mortgage passes on reverse mortgage lenders must play the percentages to reduce their chances of the loan amount inflating above and eliminating the equity in the home.
Naturally, the younger spouse typically lives longer allowing compounding interest a greater chance to accumulate and possibly exceed value. This can happen if the lender hasnt covered itself by creating enough cushion up front.
If a married couple needs a large amount of money from the reverse mortgage many times this is not possible because the age of the younger spouse is prohibitive. But what if the other spouse is quite a bit older and would qualify?
How some people get around this is by disclaiming the younger spouse from the note and deed of trust. They can now cash out at the larger sum.
Bingo! Theyre now in the money.
Of courseit couldnt be that easy, could it? There is something that perhaps our couple didnt think through in this scenario. The older spouse is probably going to die first.
After the bank finds out of the older borrowers passing (and they will), the remaining borrower will be notified and has roughly a year to compensate the bank.
Since reverse mortgages are generally used on a I need the money because I need the money basis, chances are the surviving spouse will need to sell the home at that point.
The important thing to think through is that many people have long emotional ties to their home. My suggestion is to be sure the financial obstacle you wish to overcome with a reverse mortgage, by disclaiming the spouse, is worth the emotional heartache of losing the home too.
Removing the younger borrower from the note should be done only if necessary, and if both parties have full comprehension of future consequences.
In the very typical situation in which 2 borrowers will be on the loan, the mortgage company discounts the older borrower and only takes into consideration the younger borrowers age.
Since one of the ways a reverse mortgage ends is when the last person on the mortgage passes on reverse mortgage lenders must play the percentages to reduce their chances of the loan amount inflating above and eliminating the equity in the home.
Naturally, the younger spouse typically lives longer allowing compounding interest a greater chance to accumulate and possibly exceed value. This can happen if the lender hasnt covered itself by creating enough cushion up front.
If a married couple needs a large amount of money from the reverse mortgage many times this is not possible because the age of the younger spouse is prohibitive. But what if the other spouse is quite a bit older and would qualify?
How some people get around this is by disclaiming the younger spouse from the note and deed of trust. They can now cash out at the larger sum.
Bingo! Theyre now in the money.
Of courseit couldnt be that easy, could it? There is something that perhaps our couple didnt think through in this scenario. The older spouse is probably going to die first.
After the bank finds out of the older borrowers passing (and they will), the remaining borrower will be notified and has roughly a year to compensate the bank.
Since reverse mortgages are generally used on a I need the money because I need the money basis, chances are the surviving spouse will need to sell the home at that point.
The important thing to think through is that many people have long emotional ties to their home. My suggestion is to be sure the financial obstacle you wish to overcome with a reverse mortgage, by disclaiming the spouse, is worth the emotional heartache of losing the home too.
Removing the younger borrower from the note should be done only if necessary, and if both parties have full comprehension of future consequences.
About the Author:
Stop! Do not proceed with a HECM before acquiring a California reverse mortgage report here. Also, a good website to get quick answers about the California reverse mortgage is here.
posted by Credit Counseling at
5:36 AM
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