Reverse Mortgages and Loan Assumption: What You Need to Know
As we’ve seen, reverse mortgages can be pretty flexible. However, they are more rigid than some other FHA-backed loans, at least in terms of loan assumption. Most other types of FHA-backed loans can be assumed, although there are requirements that must be met to do so. Reverse mortgages cannot be assumed, though. Your heirs, even spouses not listed on the mortgage, cannot assume the loan.
How, then, might you handle a situation in which there are two spouses in the home, and the spouse on the loan passes on before the other spouse? Is that spouse “out in the cold”?
This is a difficult situation and one that many senior homeowners find themselves in. It is very common for one spouse to pass away before the other. If your reverse mortgage is not set up correctly, it could lead to serious issues.
The first thing to consider is putting both spouses on the reverse mortgage. If both spouses are 62 or older at the time the loan is originated, both can be listed on the mortgage as co-borrowers. In this case, the reverse mortgage will not become due and payable until both spouses pass on (or move out, sell the home, etc.).
What if one spouse is under 62, though? In the past, this was not possible to put anyone under 62 on the mortgage. However, that was changed in 2014 when the FHA revised the rules governing age. While it is still not possible to put anyone under 62 years of age on a reverse mortgage as a borrower, a spouse under 62 at the time of mortgage origination can be listed as a “non-borrowing spouse” and receive the same protections as the borrower if the older spouse were to pass away. This is the only instance in which any form of loan assumption is possible with reverse mortgage loans.