Older couple hiking

A Home Equity Conversion Mortgage (HECM) is a useful lending tool for those over the age of 62. These reverse mortgages offer access to home equity to support retirement plans, with the repayment deferred as long as the borrowers remain in the home.

Deciding if it’s the right tool for you requires careful consideration and should be part of a comprehensive retirement plan. The process can be more complicated when there are two futures involved. Be sure you know how your current or future relationships may impact your reverse mortgage options.

Split Eligibility

Eligibility for a HECM begins at 62, but couples are not always the same age. If only one of you meets the cutoff, it doesn’t mean your reverse mortgage plans have to wait for the other to celebrate some more birthdays.

In most states, a spouse under 62 will be considered a party to the loan as long their partner is eligible. They can remain on the title of the property and will need to attend the mandatory HECM counseling. However, since the portion of equity accessible by reverse mortgage is determined by age, a younger partner may reduce the amount of the HECM you can apply for, even if they are over 62.

Post-HECM Marriage

Although protections exist for spouses who were married when a reverse mortgage is originated, they do not extend to new marriages that occurred after the HECM began. For example, non-borrowing spouses that pre-date the reverse mortgage can remain in the home even after the borrower passes away or no longer resides there.

Unfortunately, a new spouse can expect a demand to repay the loan or face foreclosure under the same circumstances. One way to avoid this dilemma is to refinance the reverse mortgage to make both individuals a borrower.

Unmarried Couples

Much like a couple that marries after a reverse mortgage is established, an unmarried couple will lack non-borrower protections unless they were considered spouses according to state law when the HECM started. An unmarried couple can pursue a reverse mortgage as co-borrowers, though.

If you and your partner own a home together and both meet the criteria for a reverse mortgage, you can apply for a reverse mortgage and enjoy the full protections that apply to married borrowers. Of course, marital status may have estate implications beyond the agreement with a lender, so it’s best to discuss the possibility of a HECM with a legal or financial advisor to determine the appropriate course of action.

Find more about how a reverse mortgage could expand your retirement planning at OpenMortgage.com, or call today to speak with an experienced loan officer about your options.

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