Recently, I received an inquiry. The question was whether a reverse mortgage could be obtained when the house is solely in one spouse's name rather than jointly owned by both. To get straight to the point, it is possible, but conditions need to be considered. It is more common than one might think for only one spouse to be on the title, especially in couples with an age difference.

A reverse mortgage is a product that allows homeowners aged 62 and older to borrow against the equity of their home. It differs from a traditional mortgage that requires monthly payments. Funds can be received in a lump sum, monthly payments, or as a line of credit from the lending institution. The principal and interest are settled when the home is sold, the owner passes away, or the home is no longer used as the primary residence. The primary product is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA). It is the only type of reverse mortgage backed by the federal government.

If the titleholder is 62 or older and the spouse is under 62, there is a process to register the spouse as a non-borrowing spouse to protect their right to continue living in the home under certain conditions. However, this can vary based on contract terms and specific regulations, so it is essential to verify according to one's situation.

In the same budget, conditions can vary by region. According to Zillow, the average home value in Burlington is $890,832. This is a 1.0 percent increase from a year ago. The average effective property tax rate in Massachusetts is about 1.12 percent, which is higher than the national average. With this level of home value, property tax obligations must also be considered. Even with a reverse mortgage, the obligation to pay property taxes and insurance remains. Overlooking this can disrupt the entire financial plan later on.

When the titleholder is 62 or older and the spouse is under 62, I usually guide them through the process of registering the non-borrowing spouse. Even if the age difference is not significant, confirming this process can help reduce confusion later.

The advantages are clear. You can secure cash flow without the burden of monthly repayments. HECM is a non-recourse structure. Even if the home value falls below the loan balance, thanks to FHA insurance, heirs are not required to pay the excess. However, the disadvantages are also evident. As you use the loan, your equity decreases. The assets left for children will also be reduced accordingly. Initial costs such as origination fees and mortgage insurance premiums (MIP) are higher than those of traditional mortgages. MIP is initially around 2 percent and about 0.5 percent annually.

Here are the items to check: being at least 62 years old, primary residence requirements, ability to repay existing mortgages, and passing a financial capability assessment. If property taxes and insurance cannot continue to be paid, it may lead to a risk of default. If the title structure is complex or there is an age difference between spouses, it is essential to be more thorough. In Massachusetts, the population aged 65 and older makes up about 17.1 percent of the total. Aging continues to progress.

There are cases where this product may not be suitable. If you plan to move soon, the initial costs may not be worth it. If leaving the house entirely to your children is the top priority, other methods may be better. Ultimately, how long you plan to stay in the home is key.

Costs also need to be addressed. Closing costs, origination fees, and MIP. Together, these three can represent a significant portion of the loan amount. The exact amount varies by lender. It is advisable to get estimates from multiple places.

There are three ways to receive funds: lump sum, monthly payments, and line of credit. If you need a large sum, a lump sum is appropriate. If you want to supplement monthly living expenses, monthly payments are better. A line of credit increases as you use less. If you are not in a hurry, this can be a favorable option. Regardless of the method, the structure of drawing down equity remains the same. This point does not change.

Before applying for HECM, you must undergo mandatory counseling with a HUD-approved counseling agency. There are actual cases of fraud targeting the elderly. In cases where details like spouse title issues are involved, it is advisable to consult thoroughly and discuss with family before making a decision. This is not investment or legal advice, and it is recommended to consult with professionals before any actual contracts.