Reverse-mortgage help

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Married couples that consider a reverse mortgage, which is a loan that converts home equity into cash, likely will benefit from two rules that went into effect in August 2014.

The first change is that when a spouse dies, the survivor can stay in the home as long as he/she continues to make tax and insurance payments and maintains the property. Previously, the surviving spouse faced eviction if he/she couldn’t pay off the reverse mortgage.

The second change allows couples to take out a reverse mortgage even if one spouse isn’t 62 years old. Before, both spouses had to be 62, which led some couples to put only the elder spouse’s name on the loan. In those cases, the younger spouse was vulnerable to foreclosure after the elder spouse died, according to consumer groups.

However, a husband or wife who takes out a reverse mortgage before both spouses turn 62 now faces tighter limits on what he/she may borrow. The loans decrease based on how far the younger spouse is from turning 62, and HUD says the amount varies from loan to loan. For example, under the new rules, if the younger spouse is 60, the couple receives a maximum of 51.1 percent of its home value. Previously, the couple received 52.6 percent of a home’s value regardless of the younger spouse’s age, because the loan was based on the older spouse’s age, Diane Coats of Generation Mortgage says.

Unfortunately, the new rules don’t affect reverse mortgages that were taken out before August 2014.