The Home Equity Conversion Mortgage (HECM) offers a powerful tool for senior financial planning. However, it does come with some complex rules, especially concerning married couples where one spouse is younger than 62 years of age. Professionals such as REALTORS, estate planners, elder law attorneys, and financial advisors who work with senior homeowners need a clear understanding of the basics surrounding the Eligible Non-Borrowing Spouse (NBS) rights, rules, and responsibilities. Several safeguards exist to protect the surviving NBS so they can remain in the home without any mortgage payment.

Can an Eligible Non-Borrowing Spouse remain in the home after the HECM borrower dies?

An Eligible Non-Borrowing Spouse can defer loan repayment and remain in the home indefinitely, so long as they meet ongoing requirements to pay property taxes, insurance, and maintain the home.

This deferment right forms the cornerstone of the HECM’s consumer protection, but doesn’t come automatically. The ability of the surviving spouse comes with several provisos. They can remain in the home if they comply with the relevant FHA regulations. For clarity in advising your clients, let’s start with the definition and rules surrounding the Non-Borrowing Spouse status.

Defining the Eligible Non-Borrowing Spouse

The term “Non-Borrowing Spouse” refers to the spouse who is not named on the HECM loan documents as a borrower. This means they are not a co-borrower and are not personally responsible for repaying the loan.

An NBS is considered Eligible only if they meet specific criteria established by the FHA at the time of loan closing:

1. Marital Status: The individual must have been married to the borrower at the time of the HECM closing and remained married until the death of the borrowing spouse.
2. Primary Residence: The spouse must have occupied the property as their principal residence at the time of the loan origination and must continue to reside there upon the death of the borrower.
3. Age Eligibility: The spouse must meet the HECM age requirement (currently 62 or older) at the time of closing.

A Young Spouse Can Still be an Eligible Non-borrower

The age requirement is critical. If the non-borrowing spouse is not yet 62 at closing, they cannot be a borrower on the HECM loan. Consequently, they become categorized as a Non-Borrowing Spouse. Protections for them later on will depend on them being an Eligible rather than an Ineligible NBS. This distinction profoundly impacts a couple’s long-term financial security and must be factored into the initial planning.

The difference between the two statuses holds monumental consequences for the family’s future. The Eligible NBS is the spouse who satisfies all three FHA criteria at the time of loan closing. This includes disclosure and residency. They are then granted the federal right to defer the HECM loan repayment and remain in the home indefinitely. This means even if they were under age 62 at closing, they call be considered an eligible NBS.

Conversely, the Ineligible NBS is any spouse who fails to meet any of the eligibility criteria at closing. Quite often, this is a non-borrower who married the borrower after the HECM closing. Another common disqualifying has to do with the non-borrower not meeting the residency requirement. An ineligible NBS has no FHA-guaranteed right to remain in the home after the borrower’s death. In other words, the loan becomes due and payable at the borrower’s passing. While you should understand the difference, contacting a HECM-certified housing counselor about it can help. This contrast is a central point of HECM financial planning.

Rights and Responsibilities of the Eligible NBS

Should the borrowing spouse pass away, the Eligible Non-Borrowing Spouse has two fundamental rights. These rights pair with several strict responsibilities required to continue living in the home.

The Right to Defer Repayment

The primary right afforded to the Eligible NBS is the ability to defer the loan’s due and payable status. This means the surviving spouse can remain in the home and avoid loan repayment. They can meet the following ongoing conditions:

• Timely Proof of Claim: The NBS must establish legal right to the home or have obtained a legal right to remain in the home (e.g., through a life estate or other ownership mechanism) within 90 days of the borrower’s death.
• Continued Occupancy: The home must remain the principal residence of the surviving spouse.
• Maintenance of Obligations: The NBS must ensure all property taxes, homeowner’s insurance premiums, and property charges (like HOA dues) are paid on time, and the home is maintained in good repair.

Access to HECM Funds

Please note that the Eligible NBS may no longer access the HECM’s remaining funds under in the line of credit. If the borrowing spouse dies, the loan becomes fixed, with no further draws available. Even if the loan has not reached its maximum claim amount, it’s closed to further access.

The Ultimate HECM Checklist: Securing the Non-Borrowing Spouse

For professionals advising couples, proactive planning is essential. Use this two-phase checklist to guide your clients through the HECM process and secure the surviving spouse’s future.

Phase 1: Planning and Origination (Ensuring Non-borrowing Spouse Eligibility)

• Verify Age Requirement: Confirm the non-borrowing spouse is 62 years of age or older at the time of loan closing. If not, the NBS is Ineligible and will not be protected.
• Disclose and Discuss: Fully disclose the specific implications of the NBS status, including the inability to access future funds from the line of credit upon the borrower’s death.
• Ensure Legal Title: Advise the client on ownership structure (e.g., trust, joint tenancy, life estate) to ensure the NBS has a clear and established legal right to occupy the property.
• Confirm Documentation: Verify that the non-borrowing spouse is correctly identified as the NBS on all HECM loan documents and FHA disclosures.
• Assess Long-Term Needs: Factor in the potential loss of access to the line of credit when determining the initial disbursement and reserve amounts for the borrowing spouse.

Phase 2: Activating and Maintaining Deferral for the Non-borrowing Spouse

• Notify the Servicer: The NBS must notify the HECM loan servicer of the borrower’s death as soon as possible, ideally within 30 days.
• Submit Death Certificate: Provide a certified copy of the borrower’s death certificate to the loan servicer within 90 days of the death.
• Complete NBS Certification: The servicer will require the NBS to complete a specific Eligible Non-Borrowing Spouse Certification package to formally request deferral.
• Establish Occupancy: The NBS must continue to occupy the property as their principal residence.
• Maintain Financial Obligations: The NBS must consistently meet the loan terms by paying property taxes, hazard insurance, and HOA dues on time, and keeping the home in good repair. Failure to meet any of these maintenance obligations will terminate the deferral.

Why the Non-borrowing Spouse Might Refinance a HECM to a New HECM

An Eligible NBS who wants to access home equity for living expenses might consider a HECM-to-HECM refinance. They must be 62 or older and meet all other HECM requirements.

Refinancing an existing HECM into a new HECM allows the surviving spouse to become the new borrower. This can reset the line of credit if there is still sufficient equity at their spouse’s passing. This can unlock a new principal limit, providing access to new funds.

Pros and Cons of Refinancing for the NBS

Factor	Pros (Why Refinance?)	Cons (What to Consider?)
Cash Flow	Provides immediate liquidity to fund home repairs, healthcare, or lifestyle expenses that the original fixed loan could not cover.	Costs of Origination: The new HECM will involve new closing costs, FHA mortgage insurance premiums, and fees.
Loan Reset	The surviving spouse becomes the new primary borrower, potentially securing a new, higher principal limit based on current rates and home value.	Loan Balance: The new HECM must first pay off the entire balance of the old HECM, which may consume a large portion of the new funds.
Interest Rate	Opportunity to secure a potentially lower interest rate or switch from an adjustable to a fixed rate, depending on market conditions.	Reduced Equity: The net funds available after paying off the old loan and new closing costs may be minimal, particularly if the home value has not appreciated significantly.
Flexibility	Provides the surviving spouse with full control over the loan and its disbursement options (e.g., term payments, tenure payments, line of credit).	Appraisal Risk: The new HECM is based on a new appraisal. If the home value has declined, the new principal limit may be lower than expected.

Professionals should help the surviving spouse understand the decision to refinance or not. We need to include the surviving spouse’s immediate financial need, the current home value, and the costs associated with the new loan. This can become a highly specialized consultation that demands professional expertise.

Your Professional Responsibility toward a Non-borrowing Spouse

The Eligible Non-Borrowing Spouse provision plays a critical consumer safeguard role for HECM borrowers. As professionals, we need to ensure our senior homeowning clients understand this provision before they close on the HECM.

• Educate: Ensure both spouses understand the criteria for eligibility and the limitations on accessing funds.
• Plan: Integrate the NBS status into the overall estate and financial plan, ensuring the spouse has a legal right to the property (e.g., through a trust or will).
• Support: If the surviving spouse needs to defer repayment or refinance, provide timely guidance to navigate the strict FHA timelines and requirements.

Such preparation can be the difference between a successful HECM outcome and a potentially devastating one for the surviving spouse.

If you’ve had experience helping or advising a senior homeowning couple with a reverse mortgage and one was a non-borrowing spouse, please share in the comments below your insight into their challenges or successes. We’d also love to hear from you if you have any questions or would like some direction for such situations.