Reverse Mortgages and Second Marriages

When Frank Sinatra crooned “Love is lovelier the second time around…just as wonderful, with both feet on the ground,” he extolled the virtues of second marriages. Falling in love later in life, when you’ve accumulated significant assets, can be complicated, especially when it comes to protecting your loved one in case your time is up before hers. This is especially true if you have a reverse mortgage, because if it’s jointly held in the name of you and your first spouse, your newly beloved may lose your home if you were to pass first.

Understanding reverse mortgages

A reverse mortgage – also known as a Home Equity Conversion Mortgage (HECM) -- is available to homeowners 62 years of age and older, who have a good amount of equity accumulated in their primary residences. Unlike a traditional mortgage, you don’t pay back the money on a monthly basis. Instead, you receive payments in the form of a one-time lump sum, a credit line, a monthly distribution, or a combination of the three. The loan is yours to keep until you sell the home or die, at which point, the loan must be paid back in full, generally from its sale.

It’s a pretty easy financial agreement -- unless you do it with your first spouse, she passes away, and then you fall in love and remarry. If you then predecease your new spouse, the loan must be repaid. If the house must be sold for that purpose, your widow may have nowhere to live.

Protecting your beloved

The easiest way to ensure that your spouse will never be homeless is to refinance your reverse mortgage into a new one with both you and your new spouse on the title. This can only occur if there’s still accumulated equity in the home and your new spouse is older than 62. If you’re both eligible, the simplest next step would be to check with your current lender to see if they’ll do the refinance. But also consult with other lenders to make sure that you’re getting the best rates currently available.

If your home’s value has dropped, you may not be eligible for a reverse mortgage refinance. In that case, your best bet would be to consult with an elder care attorney who specializes in estate planning. One option would be that you purchase an insurance policy that could cover the outstanding reverse mortgage balance in case of your death. There are other options, but they are complex, and best administered under the wise and experienced eyes of a certified financial planner or estate planning attorney.

As Sinatra sang: “Love’s more comfortable the second time you fall, like a friendly home the second time you call.”  Make sure your spouse will always have a friendly home to call her own, by making sure she’s protected if you currently have a reverse mortgage. That kind of love is second to none.