Profound Consequences to Disclaiming Spouse for Reverse Mortgage
Seniors receive a reverse mortgage loan based on 3 important factors: home worth, borrower age, and the rate of interest. The higher the age of the senior, the higher the loan will be in relation to the opinion of value by a licensed appraiser.
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.
With that in mind the lender must give the younger borrowers a lower loan to value ratio than the older ones. The young ones will be in the home longer, and the lender must account for the power of compounding interest working against the security for their investment.
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.
Bingo! Theyre now in the money.
But not so fast, there are problems in doing this. Sometimes in the busy scheme of things, we forget that we will not be here forever! Yes, we too will pass.
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.
The important thing to think through is that many people have long emotional ties to their home. My suggestion is to be sure the financial obstacle you wish to overcome with a reverse mortgage, by disclaiming the spouse, is worth the emotional heartache of losing the home too.
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.
With that in mind the lender must give the younger borrowers a lower loan to value ratio than the older ones. The young ones will be in the home longer, and the lender must account for the power of compounding interest working against the security for their investment.
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.
Bingo! Theyre now in the money.
But not so fast, there are problems in doing this. Sometimes in the busy scheme of things, we forget that we will not be here forever! Yes, we too will pass.
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.
The important thing to think through is that many people have long emotional ties to their home. My suggestion is to be sure the financial obstacle you wish to overcome with a reverse mortgage, by disclaiming the spouse, is worth the emotional heartache of losing the home too.
Disclaiming the spouse should be done on a need basis and both spouses should understand and accept the future consequences.
About the Author:
Stop! Do not proceed with a HECM before acquiring a California reverse mortgage report here. Also, a website that answers many California reverse mortgage questions is here.
posted by Debt Consolidation Loan at
5:21 AM
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