Reverse Mortgage Disclaimer Deed & Consequences thereof
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.
In the very typical situation in which 2 borrowers will be on the loan, the mortgage company discounts the older borrower and only takes into consideration the younger borrowers age.
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.
How some people get around this is by disclaiming the younger spouse from the note and deed of trust. They can now cash out at the larger sum.
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.
In the very typical situation in which 2 borrowers will be on the loan, the mortgage company discounts the older borrower and only takes into consideration the younger borrowers age.
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.
How some people get around this is by disclaiming the younger spouse from the note and deed of trust. They can now cash out at the larger sum.
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:
Don't even consider a HECM before acquiring a California reverse mortgage report here. Also, a spectacularly educational site about the California reverse mortgage can be found here.
posted by Credit Counseling at
5:31 AM
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