Reverse mortgage lenders lend to borrowers on three criteria; value of the home, age, and interest rates. The older the borrower, the more a lender will lend to that person as a ratio of the value of the home.
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.
This makes sense from a lenders point of view. After all, the mortgage doesnt end until the last surviving spouse either kicks the bucket or sells the house. From a lenders point of view the mortgage cant exceed value or the lender loses money.
Naturally, the younger spouse typically lives longer allowing compounding interest a greater chance to accumulate and possibly exceed value. This can happen if the lender hasnt covered itself by creating enough cushion up front.
That being said borrowers may realize a dilemma if one spouse is quite a bit older than the other. If the couple needs a sizable sum of money out of the mortgage, the age of the younger borrower can dismantle this plan.
Are they dead in the water? Absolutely not. The younger spouse can sign a disclaimer deed, effectively making the older borrower the sole borrower, and they can get their money.
Theyve accomplished the goal! Yeah!
There are, however, ramifications to this maneuver. The biggest one centers around the little known fact that sometimes we, as mere mortals, occasionally die.
After the bank finds out of the older borrowers passing (and they will), the remaining borrower will be notified and has roughly a year to compensate the bank.
The purposes of needing this type of loan are typically because the borrower really needs the money. Most likely, the borrower left behind wont have a choice but to sell to reimburse the bank.
Many people have lived in their home for generations. What must be remembered is the bond that people can have with their residence. Make sure disclaiming a younger spouse is worth possibly losing the house and all of the memories that go with it.
Disclaiming the spouse should be done on a need basis and both spouses should understand and accept the future consequences.
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.
This makes sense from a lenders point of view. After all, the mortgage doesnt end until the last surviving spouse either kicks the bucket or sells the house. From a lenders point of view the mortgage cant exceed value or the lender loses money.
Naturally, the younger spouse typically lives longer allowing compounding interest a greater chance to accumulate and possibly exceed value. This can happen if the lender hasnt covered itself by creating enough cushion up front.
That being said borrowers may realize a dilemma if one spouse is quite a bit older than the other. If the couple needs a sizable sum of money out of the mortgage, the age of the younger borrower can dismantle this plan.
Are they dead in the water? Absolutely not. The younger spouse can sign a disclaimer deed, effectively making the older borrower the sole borrower, and they can get their money.
Theyve accomplished the goal! Yeah!
There are, however, ramifications to this maneuver. The biggest one centers around the little known fact that sometimes we, as mere mortals, occasionally die.
After the bank finds out of the older borrowers passing (and they will), the remaining borrower will be notified and has roughly a year to compensate the bank.
The purposes of needing this type of loan are typically because the borrower really needs the money. Most likely, the borrower left behind wont have a choice but to sell to reimburse the bank.
Many people have lived in their home for generations. What must be remembered is the bond that people can have with their residence. Make sure disclaiming a younger spouse is worth possibly losing the house and all of the memories that go with it.
Disclaiming the spouse should be done on a need basis and both spouses should understand and accept the future consequences.
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Do not go forward with a HECM before acquiring a California reverse mortgage report here. Also, a website that answers many California reverse mortgage questions is here.
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