Dear Dr. Don,
I have a reverse mortgage, and I have been trying to add my wife to it. However, I’ve been told that the only way I can accomplish this is by refinancing into a conventional mortgage, which will only defeat my purpose.
I have been in a reverse mortgage since 2009. My wife and I are both 68 years old. We’ll both turn 69 within the next 2 months. Please tell me what our options are. God forbid that I should I predecease her.
— Sheldon Signatory
You may be able to refinance the reverse mortgage. You’ll pay a 2nd set of closing costs, but you can put the property and the loan in both of your names.
Depending on the loan balance and the current value of the property, it may not make economic sense. That could be why you were told that a conventional mortgage was the only way to add your wife to the deed and mortgage.
If your concern is that she’ll be forced out of the house after you die, that risk has been reduced. If you have a home equity conversion mortgage, or HECM, with a case number assigned before Aug. 4, 2014, your wife can stay in the home after you pass as a non-borrowing spouse, providing the reverse mortgage is eligible for the Mortgagee Optional Election, or MOE, Assignment and is approved for that assignment.
The MOE Assignment by the mortgagee involves modifying the loan documents and providing the Department of Housing and Urban Development with a valid, legally enforceable 1st lien on the property.
The letter speaks to the modification of the loan documents only in terms of the eligible surviving non-borrowing spouse.
Your wife still will have to meet all the contractual obligations of the loan. She has to pay the taxes, keep up the property and keep it insured. It has to be her primary residence.
Before taking on the costs of refinancing the reverse mortgage, I recommend meeting with a real estate attorney to talk about how protected your wife is as a non-borrowing spouse, should you die before her and don’t refinance the reverse mortgage. You also will want to make sure she’s in your will to inherit the house at your death, or at least has the ongoing legal right to remain in the property.
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