Ownership and Title
One thing to consider with all mortgages, including the reverse mortgage loan, is how ownership of the property is structured. In most instances, the property title is held in traditional fee simple or joint ownership. However, occasionally the home ownership can be in a trust.
There are only two types of trusts - revocable and irrevocable. However, there are many different names and variations within each of these types. Generally speaking, in a revocable trust the grantor is in charge of all of the assets within the trust right up to the end, meaning the grantor can make changes at any time without the consent of the beneficiaries. The assets of the trust are transferred to the beneficiaries upon the death of the grantor. In an irrevocable trust, the assets are transferred out of the grantor’s estate to the trust, with control of those assets given to a third party (e.g. - an adult child, attorney or bank). The grantor cannot make any changes to the trust without the consent of the beneficiaries.
We can do a reverse mortgage in either situation where the property is in a revocable or irrevocable trust. However, a review of the trust document is required. In some cases, there may be a need for your attorney to prepare an addendum to make sure that the language complies with the terms of the reverse mortgage.
A common example of an irrevocable trust is a life estate. In a life estate, title to the property is given to someone else, usually the children, with the original owners retaining the right to occupy the home as long as they live. We can do a reverse mortgage when a life estate exists. However, the children / heirs to the property must agree to the loan and be a part of the loan process, which would include participating in the HUD counseling, signing application and closing documents, etc.
Is ownership of your property held in a trust? Just ask us about your individual situation and whether it would meet requirements for a reverse mortgage. You might find that it’s a lot simpler than you realize.
Video by: Harlan Accola, National Reverse Mortgage Director, NMLS#277693 with Fairway Independent Mortgage Corporation.
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*This is not tax, legal or financial advice. Please consult a tax, legal or financial expert for your specific situation.