Finance Guides

Mortgage companies factor the amount of available funds, for a borrower to receive, based upon current interest rates, home value, and age of borrower. Older reverse mortgage borrowers receive more money their younger counterparts.

Supposing there is more than one person on the loan. The lender factors the youngest persons age as the determinant in the equation to find the loan amount.

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.

The thing the lender must take into consideration is how interest accumulates and compounds over time. The mortgage company has to lend less to the younger borrowers because they live longer, and interest has more time to eat away at the equity.

Where a problem rears its head is when husband and wife are getting a reverse mortgage and in need a large cash out figure. That figure may exceed that which the younger spouse qualifies to get, but is within reach of the older spouse.

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.

Fabuloso! The borrowers have their needed cash.

There are, however, ramifications to this maneuver. The biggest one centers around the little known fact that sometimes we, as mere mortals, occasionally die.

The bank will at some point discover the eldest borrowers death and will demand payment. The younger spouse then has about twelve months to return the due amount.

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.

Houses are more than just buildings, and that is especially true for seniors. A house is a memory-filled home. If disclaiming a spouse to get a reverse mortgage is on the table, be positive the loan merits the probability of losing the home and its memories in the end.

Disclaiming the spouse should be done on a need basis and both spouses should understand and accept the future consequences.

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