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Reverse Mortgage Glossary

Non-Borrowing Spouse (NBS)

A non-borrowing spouse is a spouse who doesn’t qualify to be a full borrower on a HECM reverse mortgage because they are not yet 62.

The Department of Housing and Urban Development (HUD) made important changes to the HECM reverse mortgage program in April 2014 to better protect non-borrowing spouses. Prior to the change, only borrowers over the age of 62 could be on the reverse mortgage and on title to the home, which created some big potential pitfalls if the older spouse passed away. The death of the older spouse was considered a maturity event that required the younger non-borrowing spouse to either pay off or refinance the loan balance or be forced to give up the home.

Today, a surviving non-borrowing spouse can’t be required to pay back the loan or be forced out of  home as long as they live in it and pay required property charges (property taxes, homeowner’s insurance, HOA dues, etc.). The following is rundown of how the new rules for non-borrowing spouses work:

  • Both spouses are required to be party to the reverse mortgage contract, but the majority of the qualifying and paperwork will involve just the fully qualifying spouse. No longer can a non-borrowing spouse be left completely out of the transaction (as was the case before the rule change).
  • Reverse mortgage proceeds are calculated based on the younger spouse’s age. If the younger spouse is a lot younger, it could result in a substantially reduced benefit amount.
  • Non-borrowing spouses “inherit” the protections of the reverse mortgage if the older spouse passes. The reverse mortgage is not due and payable as long as the survivor continues paying required property charges such as property taxes, homeowner’s insurance, HOA dues, etc., and lives in the home.
  • Though the surviving spouse will not need to repay the loan balance, they won’t have access to any remaining funds in the reverse mortgage. The loan closes out when the fully qualifying borrower passes away. If the surviving spouse wishes to access more funds, they will need to refinance into their own reverse mortgage.

As long as a surviving non-borrowing spouse continues to live in the home and pay property charges on time, he or she never will need to worry about losing the home if their older spouse passes away.