Reverse Mortgage Disclaimer Deed & Consequences thereof
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.
If the mortgage amount ever exceeds value and the home is sold, either because the last surviving spouse dies or the from a voluntary sale, the lender automatically loses money. This being the case the mortgage company must be conservative by using the age of the younger spouse.
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.
Theyve accomplished the goal! Yeah!
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.
If the older spouse passes away first, the bank will eventually find out and will call the note due. From there the surviving spouse has about 12 months to pay the bank back.
People with tons of money in the bank and investments dont normally get reverse mortgages. With that in mind the spouse will 95 times out of 100 be forced to sell the home to pay the lender.
Houses are more than just buildings, and that is especially true for seniors. A house is a memory-filled home. If disclaiming a spouse to get a reverse mortgage is on the table, be positive the loan merits the probability of losing the home and its memories in the end.
Using a disclaimer deed is something that should never taken lightly. Financial burdens are emotional. Dont move too quickly without some thought first.
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