Attorney FAQ's

If the property is in irrevocable trust, can a reverse mortgage still be taken?

• If the trust is a revocable trust the client can take out a reverse mortgage. Also, after they take out a reverse mortgage the property can still be put into a trust, but it must be a revocable trust.

If either spouse is not yet 62, can a reverse mortgage be taken?

• Yes. However, the younger spouse will have to quit claim their interest in the house to the older spouse and the older spouse then takes out the reverse mortgage in his or her name. If this is done and the older spouse passes away first, the money taken out in the reverse mortgage becomes due.

When is it advisable for a younger homeowner to quitclaim their interest in the property to the older homeowner who is qualified for a reverse mortgage?

• In this situation of one spouse being younger than 62, taking a reverse mortgage by the older spouse is advisable only 1) If the couple is under serious financial pressure and is going to lose the house, AND 2) If the younger spouse is planning on selling the house anyway when the older spouse passes away.

In the case of a younger homeowner quit claiming their interest so the older homeowner can qualify for a reverse mortgage, can the younger homeowner be added to the mortgage when he or she turns sixty-two?

• No. The clients need to know that when the younger spouse turns 62, he or she cannot be just added to the reverse mortgage. In order to do that the mortgage must be refinanced. This means that the property values will have had to remain constant or increased since the time of the original reverse mortgage, AND also that enough equity remains in the house to enable a reverse mortgage to be taken at that future time.

How will this affect other benefits, for example, energy assistance?

• Generally the answer is no as the proceeds from a reverse mortgage are considered to be a loan and not considered as income. You do have to be careful if there’s a means test to assets. If they say we are going to give you an energy loan of x amount of dollars, we are gong to check your assets. In this case if the client has taken a lump sum of money from a reverse mortgage and placed it in the bank, this could have a negative influence on the benefit being sought.

  It is important to note that some communities in Connecticut allow seniors to defer taxes until time of sale. That benefit is not available for people who take out reverse mortgages

How are energy efficient loans affected by a reverse mortgage?

• A client may have a loan against the property for some energy efficient grant money that they have received from the town for new windows or an energy efficient furnace. The town may lien the property and say that if the property is sold within five years of taking their assistance the client has to repay on a schedule. The reverse mortgage lender will generally allow these loans to be subordinated so long as the loan was funded by a government agency.

How is Title 19 affected by a reverse mortgage?

• As the proceeds of a reverse mortgage are not considered income, it should not affect Title 19 benefits. The client does have to be careful not to let the reverse mortgage proceeds pile up in a bank account to the point where it may affect Title 19 eligibility. Currently $1,600 is the limit to the amount that may be held in an account.

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