Spouses aren’t the only people who can share a reverse mortgage. This financial tool can also offer a way for sisters, brothers, two friends, or adult children and their parents to live together.
As with all reverse mortgage products, all borrowers must be over 62 and meet other standard eligibility requirements.
What Should I Know About Sharing a Home with a Reverse Mortgage?
As long as the borrower lives in the home, a reverse mortgage doesn’t impact who can live there with them. This means one person can have a reverse mortgage, and siblings, friends, or underaged spouses can live in the home too. However, if the borrower on the reverse mortgage moves out or passes away, the loan becomes due and payable.
Why Would It Be Advantageous to Share a Reverse Mortgage?
If two people are living together and sharing a reverse mortgage, and one needs to leave, the remaining borrower will be allowed to stay. However, if they share a home and not a mortgage, the non-borrower may be required to leave the house. This is why sharing a reverse mortgage might make sense for close friends, siblings, or even a parent and child over 62 who wish to live together.
There are no regulations to protect people not included on a reverse mortgage after the borrower leaves the home, except for eligible non-borrowing spouses.
What Protections Do Non-Borrowing Spouses Receive?
If you meet the age requirement for a reverse mortgage, but your spouse doesn’t, they can be listed on the loan documents as an”eligible non-borrowing spouse” as long as they meet HUD’s requirements.
With this designation, spouses can continue to live in the home after the borrowing spouse passes away, provided they meet the reverse mortgage contract requirements. That includes maintaining the house and paying property taxes and homeowners insurance.
After the borrower’s passing, the loan wouldn’t have to be paid off until the surviving spouse sold the house or moved out. However, the surviving spouse wouldn’t have access to a line of credit on the reverse mortgage, and any ongoing cash payments would stop.
Can I Add People to My Existing Reverse Mortgage?
It isn’t possible to add another person to an existing reverse mortgage. If you want to add someone to your mortgage, you will need to refinance or get a new loan.
Any time people are considering entering a mortgage contract, they should consult with a U.S. Department of Housing and Urban Development (HUD) approved counselor to determine if sharing a reverse mortgage is their best option.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.