real estate

New Reverse Mortgage Rules Protect Younger Spouses

If the older spouse dies, the younger spouse can stay in the home, but there is a cost.

Wayne Caudill took a reverse mortgage on the house he owns with his wife, Lynn, in 2012, after a job loss threatened the ability of the couple to keep their Roanoke, Va., home. Wayne, who was 62 then, met the minimum age to qualify, but Lynn, 55, was too young to be named a co-borrower; if he died or left the home permanently, she'd have to pay off the loan, most likely by selling the house. "It would be like being evicted from my own home," says Lynn.

New rules on reverse loans made after August 4 protect younger spouses. That's good news for the Caudills, who plan to sell their house, pay off the mortgage and move to Myrtle Beach, S.C., where they anticipate using a new reverse mortgage to pay for their next home. If anything happened to Wayne, Lynn could stay in the home, as long as it was her primary residence and she paid property taxes, hazard and mortgage insurance, and the cost of maintenance.

But the new rules come at a cost. Lenders factor in the age of the younger spouse when calculating the reverse mortgage payout; the younger the spouse and the longer the loan will be outstanding, the smaller the payout. You can get a rough estimate of how much you'd qualify for with the calculator at www.reversemortgage.org.

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