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Eligible vs. Ineligible Non-Borrowing Spouse Rules for Reverse Mortgage

Many people have asked the difference between an eligible and ineligible spouse as regards to the reverse mortgage.

Let’s set the record straight. We don’t say eligible or ineligible spouse, but eligible and ineligible ‘non-borrowing’ spouse. 

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A non-borrowing spouse is a person who doesn’t meet the HUD requirements to be a HECM borrower, and as a result, he/she won’t be included in the loan as a beneficiary.

The eligible or non-eligible status tells whether or not a spouse will be granted a deferral when the loan is due and payable if the borrower passes away.

Why we have a non-borrowing spouse is because he/she isn’t up to 62 years old, and every borrower, according to the HUD program, must be at least 62 years. However, if the non-borrowing spouse meets the other conditions, they would be eligible non-borrowing spouse for the closed loan.

Before HUD changed the rules in 2014, spouses of borrowers who were not included in the loan when the loan originated had no rights to remain in the home after the borrower passed. HUD changed that rule in 2014 but became active in early 2015.

Eligible means “protected for deferral.” 

Spouses who are not included in the loan at the time the loan originated are either eligible to receive a deferral when the borrowing partner passes or ineligible, based on other factors.

If they’re still funds on the line, an eligible non-borrowing spouse will not have access to the loan after the borrower passes. But, he/she can stay in the home for as long as they want if they can meet the eligibility requirement.

Also, the eligible non-borrowing spouse should be able to secure title to the property within 90 days of the passing of the borrower. It is advisable to add the non-borrowing spouse to the title of the home when the loan closes to avoid problems in the future.

If the non-borrowing spouse were added while both spouses are alive, there wouldn’t be any probate period, and you won’t have to worry about fulfilling the HUD 90 day rule.

Also, the non-borrowing spouse must pay the taxes and insurance on time and maintain the home according to the HUD standard.

Ineligible translates to “No Deferral Granted.” 

Ineligible non-borrowing spouses are those who don’t live in the property, maybe because they are separated or were not married to the borrower at the time the loan was closed

It means that they would not be eligible for the deferral, and the loan would be due and payable when the borrower passes away.