Reverse Mortgages With A Family Trust

It’s best to know all the facts when deciding to go with a reverse mortgage.  There are basic requirements for the borrower(s) like:

• 55 years of age (or older)
• Live in the home as the primary residence
• Up to date on homeowners insurance and property taxes
• Able to maintain the home from falling into disrepair

I’d also strongly recommend knowing some of the finer details for your exact situation.  One of those situations that may occur is having the home vested in a family trust.  Family trusts can be beneficial to heirs in several ways.  Trusts can keep your estate private and also help avoid probate providing financial benefits to heirs.  However, trusts don’t have to prevent you from getting a reverse mortgage.

If a borrower has a home vested in a family trust, a reverse mortgage can still happen.  The steps are just a bit different for this situation.

The lender would do a title search and confirm that the name on the title is the name you provided on your application.  The lender would also review the trust to ensure it complies with HUD guidelines.  Even if it does not, there are options to still proceed with a reverse mortgage, such as taking the home out of the trust or updating the trust to meet the HUD guidelines.  

Trusts can also be amended after the reverse mortgage closes.  Typically the lender would need to be notified if this occurred for certain circumstances (like death of a beneficiary for example).  

The rest of the reverse mortgage works the same from this point on.  The bank still makes payments to the borrower.  The borrower can still choose the payment options:

• Lump sum
• Fixed payments over time
• Line of credit
• Combination of those options

The key thing to remember is that regardless of who inherits the home based on the trust, a reverse mortgage would become due and payable upon the death of the borrower.  This means that any heir who inherits the home would need to repay the loan or sell the house in order to repay the loan.  

If your home is vested in a trust and you are considering a reverse mortgage, it may be helpful to speak to an expert.  I’d recommend the team at Equity Access Group.  This is a team that specializes in reverse mortgages, and they’d be glad to help give you the answers you need so that you can be confident in your decision.