Key Takeaways
- At least one borrower must be 62 years old to qualify for a HECM.
- The age requirement is based on actuarial tables to protect the FHA insurance fund.
- Younger spouses can be protected under the Non-Borrowing Spouse rules.
\n\nThe most well-known rule of a reverse mortgage is the age restriction: You must be 62 years old. But why 62? Why not 60 or 65? And what happens if you are 65, but your spouse is only 58?
Why Age 62?
The Home Equity Conversion Mortgage (HECM) program is insured by the Federal Housing Administration (FHA). When designing the program in the late 1980s, the government needed a way to ensure that the loan balances wouldn't outgrow the home values too quickly.
A reverse mortgage is a negatively amortizing loan (the balance grows over time). If a 40-year-old took out a reverse mortgage, the interest would compound for 40 or 50 years. The loan balance would vastly exceed the home's value, bankrupting the FHA insurance fund.
By setting the minimum age at 62, the actuarial tables suggest that the borrower's life expectancy aligns safely with the projected growth of the home's equity.
Furthermore, age 62 aligns with the earliest age an American can claim Social Security retirement benefits, making it the standard entry point into "senior" status for federal financial programs.
The Rule for Married Couples
Historically, if a 65-year-old husband and a 55-year-old wife wanted a reverse mortgage, the only way to get one was to remove the 55-year-old wife from the property title.
This led to catastrophic consequences. If the older husband died, the younger wife (who was not on the loan or the title) was immediately foreclosed on and evicted from her own home.
The Non-Borrowing Spouse Protections
To stop these evictions, HUD introduced the Eligible Non-Borrowing Spouse (NBS) rules in 2014.
Today, if one spouse is 62 or older, and the other spouse is under 62, you can still get a reverse mortgage. - The younger spouse is listed on the loan as an Eligible Non-Borrowing Spouse. - The Protection: If the older borrowing spouse passes away, the younger NBS is legally allowed to stay in the home for the rest of their life, provided they continue paying the property taxes and insurance. - The Drawback: When calculating how much money you can borrow (the Principal Limit), the lender uses the age of the youngest spouse. Because a younger spouse is expected to live longer, the lender will significantly reduce the amount of cash you are allowed to withdraw upfront to protect the equity over a longer time horizon.\n