Although couples typically take out a reverse mortgage loan together, there are some circumstances in which one spouse does not meet the eligibility requirements of the loan. In these cases, the eligible spouse may take the reverse mortgage loan in their name alone. While the borrowing spouse is living and upholding the terms of the loan, this arrangement allows both spouses to enjoy the advantages of the reverse mortgage. However, what happens when the loan comes due depends on the non-borrowing spouse’s designation as eligible or non-eligible.

Who is considered an eligible non-borrowing spouse?  

As the term suggests, a non-borrowing spouse is married to a reverse mortgage borrower but not included on the loan.  The designation is specific to home equity conversion mortgages (HECMs), which are government-insured reverse mortgages.

While proprietary reverse mortgage borrowers may also fit the non-borrowing spouse profile, the Department of Housing and Urban Development (HUD) guidelines do not necessarily apply to their loan. Usually, a spouse is not eligible for the loan because they do not meet the age requirement (62+).

If a non-borrowing spouse on a HECM loan meets HUD’s requirements, they can be eligible for certain rights and protections should the borrowing spouse pass away or leave the home for an extended period. These protections allow extra time to grieve and decide what to do with the mortgage.

To be considered eligible, a non-borrowing spouse must:  

• Participate in mandatory HECM financial counseling with the borrowing spouse.
• Be listed as a non-borrowing spouse on the loan.  
• Be legally married to the HECM borrower when the loan closes and remain so until the loan becomes due, typically when the borrower dies. 
• Live in the home as their primary residence at the time of closing and afterward.  

What protections are available to eligible non-borrowing spouses?  

HUD allows an eligible non-borrowing spouse to remain in the home after the loan comes due as a result of the borrower’s death or permanent departure from the home. While these protections enable a non-borrowing spouse to remain in the home, they will not continue to receive payments from the mortgage, and any lines of credit will no longer be available to them. 

Recent updates to non-borrowing spousal protections

Until HUD issued Mortgagee Letters in 2014 and 2021, a spouse who wasn’t a co-borrower on a HECM loan could face eviction if they didn’t pay off the loan secured by the deceased spouse.

The 2021 Mortgagee Letter afforded eligible non-borrowing spouses the following protections.  

• Non-borrowing spouses are not required to provide documents showing they have a marketable title or a legal right to remain in the home.  
• The non-borrowing spouse is protected upon the borrower’s death or if the borrower is in a long-term care facility for more than 12 months.  
• A member of a same-sex couple can be an eligible non-borrowing spouse if they were in a committed relationship with the borrower but were prohibited, at the time of the HECM loan’s origination, from legally marrying based on the gender of both the borrower and non-borrowing spouse. To qualify, they must have legally married prior to the death of the borrower and remained married until the borrower’s death. 

In most cases, these newer protections will apply to borrowers who took out their mortgages before these letters were issued, provided they meet the eligibility requirements for non-borrowing spouses. If you have any questions about eligibility for these protections, your loan servicer should be able to help clarify how they apply to your loan and situation.

What happens to the non-borrowing spouse when the borrower moves to a long-term care facility or dies? 

Usually, a reverse mortgage becomes due immediately after the borrower’s death, or they have left the home for over 12 months to move into a long-term care facility. However, when an eligible non-borrowing spouse is involved, the loan enters a deferral period during which the lender will not try to collect, and the proceeds are frozen. The eligible non-borrowing spouse can stay in the home provided the following requirements are met:  

• The non-borrowing spouse was married to the borrower at the time of the loan closing and remained married until the spouse’s death or departure from the home. 
• The HECM isn’t in default for any reason.  
• The individual is listed as a non-borrowing spouse in HECM documents. 
• The non-borrowing spouse plans to continue to live in the home as the primary residence.  
• The non-borrowing spouse continues to pay maintenance, property taxes, and home insurance. 

Situations that lead to a loss of eligibility 

If a borrower has an existing reverse mortgage and remarries, the new spouse will not be considered an eligible non-borrowing spouse. The borrower would have to apply for a new HECM loan for the new spouse to qualify for non-borrowing spousal protections. 

Because the protections afforded to eligible non-borrowing spouses are meant to protect married people living together, there are several ways in which a non-borrowing spouse can lose eligibility status. 

• The non-borrowing spouse moves out of the home during the period that a reverse mortgage is in place.  
• The borrower divorces the non-borrowing spouse after the reverse mortgage loan closes. 
• A non-borrowing spouse doesn’t meet the HUD requirements — for instance, a married couple who doesn’t cohabitate in the primary residence. Or a non-borrowing spouse not listed as such on the reverse mortgage. 

It’s very important that spouses considering a reverse mortgage, especially one that would list only one member of the couple as a borrower, have clarity on the impact that the mortgage coming due would have on the non-borrowing spouse. While an eligible non-borrowing spouse could stay in the home, it’s wise to work with a financial advisor as part of the loan-taking process to put plans in place for the future of the loan and security of both spouses.