There are a few different reasons why a spouse might be a non-borrowing spouse, but the most common is age. The minimum qualifying age for a HECM reverse mortgage is 62.
Important new protections for the non-borrowing spouse (NBS)
The Department of Housing and Urban Development (HUD) made important changes to the HECM in April 2014 to better protect non-borrowing spouses. Prior to the change, only individuals over the age of 62 could be on the reverse mortgage loan agreement. This created a big potential pitfall for spouses younger than 62 if the older spouse passed away. The death of the older spouse triggered a maturity event that made the loan balance due and payable in full. The younger spouse (who was not on the loan agreement) had to either pay off or refinance the loan balance or be forced to give up the home.
Fortunately, HUD resolved the problem by creating new protections for non-borrowing spouses. Today, non-borrowing spouses can remain living in the home after the death of the older spouse without having to repay the loan balance. This so-called deferral period is valid as long as the non-borrowing spouse:
- Has established legal ownership of the home or the right to remain living in it.
- Fulfills the program obligations, including living in and maintaining the home and paying the required property charges.
Though non-borrowing spouses can “inherit” the protections built into the HECM, they do not receive any remaining funds in the HECM. Any remaining term/tenure payments are discontinued and/or any available line of credit is closed out when the older spouse passes away.