Reverse Mortgages for Houses in a Trust

A property owned in the name of a living trust is eligible for reverse mortgage financing provided the trust meets the lender’s requirements.

Each of the trust’s beneficiaries (the people who will receive the benefits or income of a trust) must be eligible reverse mortgage borrowers. This means they have to be over the age of 62 and live in the home as their primary residence. In other words, because the trust is not a living person, the reverse mortgage must be repaid when the person who benefits from the home (the beneficiary of the trust) can no longer occupy the home. However, contingent beneficiaries (beneficiaries who do not control the trust or receive its benefits) do not need to be eligible reverse mortgage borrowers.

In addition to the beneficiary requirements, the reverse mortgage lender will review the trust documentation to ensure that it is valid and enforceable, Beyond that, they will look to make sure that each borrower/beneficiary can legally live in the home for the rest of their lives.

It is possible to transfer title of the property into a living trust after the reverse mortgage transaction is complete provided the new trust is found to meet the lenders requirements (the same ones that would have applied if the trust owned the property at closing). This allows homeowners who take out a reverse mortgage the same flexibility they would normally enjoy.

Generally, only revocable trusts are allowed. Irrevocable trusts may be eligible for reverse mortgage financing but generally contain provisions which are unacceptable to the lender.

As always, consult an attorney and financial planners when dealing with trusts. For more information on reverse mortgages, contact the professionals at Grindstone United.