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Marrying Someone with a Reverse Mortgage? Understand the Risks!

Kai has sent the following question Ask ARLO!

My fiancé’ (age 68) has a reverse mortgage on his home. I believe it was signed in 2017. We live in WA state and have a defacto marriage 9 years now but are going to legally marry this year. What rights do I have to stay in the home should he die? I am 61.

 

Hello Kai,

 

You have two different issues and I can only really address one. The first is the title. If you are not on title to the property and something happens to your spouse, I cannot answer what the laws are regarding marriage and heirship in your state.  For that, you really need to consult with an attorney in Washington who can tell you what your rights are under your circumstances.

I can address the reverse mortgage though. If your significant other (soon to be spouse) was on title as a single person and applied for the loan as a single person, your age was not considered at the time he completed his loan and you were not considered as an eligible non-borrowing spouse.  This means that regardless of whether you get title to the property at the time he passes or even if you are added to the title now, that loan will become due and payable when he is no longer living in the property as his primary residence.

 

Option #1 – Refinance into New Reverse Mortgage

refinance your reverse mortgage

You can do a few things to prevent being required to refinance or sell the home at that time. You can refinance the reverse mortgage loan in both your names as soon as you are married or as soon as you turn 62 and are eligible whether you are married or not. He would have to add you to title in either event for you to be a borrower on the loan at that time, but this would allow you to remain in the home under the terms of the reverse mortgage for your life as well.

 

Option #2 – Purchase a New Home

buy a new home checklist

You could sell the home and the two of you could relocate into a new home and use a reverse mortgage to purchase the next property in both your names. The same rules would apply on the new home. Either you wait until you are 62 or you are married and then you can be included in the new loan even if you are not yet 62 as an eligible non-borrowing spouse. And finally, you can make other plans for the event to ensure you have a place to live should your spouse predeceased you.

 

Option #3 – Purchase Insurance Policy

Look into buying an insurance policy to repay the reverse mortgage or give you funds for moving/buying another residence. Maybe you could buy a second home now that you might be able to use as a rental until the time comes that you need to use it as your primary residence later. Make other plans with family/friends in case there is not enough equity remaining for the purchase of another property at the time. But plan now.

If you choose not to or cannot take steps now (i.e. refinance, buy other property, or take out an insurance policy) to provide financial assistance at the time the reverse mortgage becomes due and payable, then you must realize that this day will probably come based on your ages.

Take advantage of the fact that there are no payments at this time and be sure that you are putting money away for the time when you may need it. If this is not possible, take a good hard look at these 3 options while there is still good equity in the property, and you are still young enough to take whatever steps are needed to ensure a peaceful transition now if one is needed.

I do not recommend that people ignore the possibility that someday the loan will come due and find themselves in a difficult situation then because they did not plan for it.  The mere fact that you are asking questions is a good first step, but you need to follow through on it now.

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