Reverse "Myth" - The borrowers can owe more than the property is worth

The Reverse Mortgage is a Non-Recourse loan. The borrowers can not owe more than the property is worth

Reverse "Myth" - Funds from Reverse can effect Social Security income and Medicare

Funds from the Reverse Mortgage are loan proceeds and not considered income. There might be certain affects on Medicaid. Discuss this with your advisor..

NOT a Last Resort....

When people ask me about Reverse Mortgages,  a lot of the time they will say something to the effect of "That’s just a last resort thing, right?" or " I would never want to have to get one of those."

These kind of statements are usually a result of misunderstanding of the Reverse Mortgage (RM)

In reality, for many senior homeowners their true last resort is having to sell the house that they have been living in for a significant portion of their life. In many cases the only reason to do either (Sell or get a reverse mortgage) is to access the equity (difference between the value and any liens) to be able to live more comfortably.

Selling may make more sense if the homeowner must go to an assisted living community for services. If in-home assisted living is possible, the RM can help, allowing the senior to remain at home. If needs are income based, and the senior needs to sell the house so they can live off the proceeds, the RM may do the same, but allowing them to stay in the home they are comfortable in.

If costs are a concern, the costs of selling a home could be much greater than that of doing the RM..Using an example of a $400,000 home, a sales commission might be between $20-25,000. However, closing costs on an RM can be as low as $2-3,000 and upwards of $18,000 depending on program.

Many senior homeowners still have financing on the property. This may have been done when they were fully employed, but are now depending on Social Security and whatever retirement savings they have. The economy has hit the retirement savings pretty hard for a good number of people, with it no longer lasting a lifetime. These seniors may be in a position that they look at selling the house as they can no longer are able to keep up with the mortgage payments.

If the equity in the property is enough, the RM can payoff the existing loan(s) allowing the senior to stay at home and not have monthly payments. To them selling would have been a last resort, which would have put them in a position of having to move into a place with no memories etc.

Recently I helped a couple who had already packed their boxes, thinking selling was their only solution. He had been laid off and was not finding work. They had a mortgage over $350,000 with payments of $1,900+. They were finding it very tough to make the payments each month, and thought selling was the only answer. This was a home that was her parents' before they lived there. We discussed the RM options and it was an incredible discovery for them. An RM was done that paid off the existing financing leaving them with a mortgage with no monthly payments. There were also funds which allowed them to do some home improvements.

Another last resort that could come up is having to move to an assisted living community as there is no income for in-home assisted living. With the right amount of equity, an RM can be done where the lender actually sends the borrower funds each month. Depending on the age of the borrower(s), the value of the home, and current interest rates, this monthly amount could be
significant. Again, this option allows the senior homeowner to stay at home
where they are comfortable.

Aside from these uses, the RM has been used many ways as discussed before. These can include purchasing a home, purchasing investments, helping family, or just having fun…I have spoken and worked with many people who did not see it as a last resort, but one for opportunity and to extend a quality of life..

Some North Bay Senior Resources...

Several resources for seniors in the North Bay...Please let me know if you would like to see some others added..

Council on Aging – 707-525-0143 – www.councilonaging.com

Elder Financial Protection Network – 888-436-3600

Seniors Inc – 707-542-1228

Sonoma County Area Agency on Aging – 707-565-5950

Institute on Aging – 415-456-8692

For information and referral services for older adults and their family members in Marin County call Senior Information at (415) 457-INFO (4636).

Marin Multi-Service Centers:

Bernard Osher Marin Jewish Community Center	(415) 479-2000
Canal Community Alliance	(415) 454-2640
Community Action Marin	(415) 457-2522
Homeward Bound	(415) 457-2114
Margaret Todd Senior Center	(415) 893-7940
Marguerita Johnson Senior Center	(415) 332-9323
Marin Senior Coordinating Council (Whistlestop)	(415) 456-9062
Ritter House	(415) 457-8182
Salvation Army Center	(415) 898-8797 or 459-4520
Spectrum Gay, Lesbian & Bisexual Center	(415) 457-1115
West Marin Community Resource Center	(415) 663-8361

Napa Resources:

BERRYESSA SENIOR CENTER, ................................................... 966-0206

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CALIFORNIA STATE PARKS & RECREATION (Bothe National State Park) ............. 942-4575

CALISTOGA SENIOR ASSOCIATION ........................................................................ 942-2760

NAPA SENIOR CENTER, 1500 Jefferson Street, Napa 94559 ............................... 255-1800

NAPA VALLEY FOOD BANK .................................................................... 253-6128

NATIONAL ASSOCIATION OF ACTIVE AND RETIRED FEDERAL EMPLOYEES (NARFE)................................. (Leave message) 257-2228

RIANDA HOUSE, 1475 Main Street, St. Helena, CA ………………...963-8555

SENIOR NUTRITION COMMUNITY ACTION OF NAPA VALLEY, 2310 Laurel Street, Napa 94559 ............... 253-6111

Reverse "Myth" - There are restrictions on how I can use the funds

Reverse Myth - There are restrictions on how I can use my funds - The borrower(s) of a Reverse Mortgage can do what they want with the funds. Mostly these are conservative uses such as consolidating debt or supplementing income. Some additional uses have included purchasing a rental property, purchasing a vacation home, making investments, helping family, buying a boat, buying a car, travelling, remodeling, in home assisted living, etc...   

Reverse "Myth" - I can not get a Reverse Mortgage if I owe money on the home.

Myth - I can not get a Reverse Mortgage if I have a loan on the property - Many Reverse Mortgages being done today are being used to payoff an existing loan, leaving the borrower(s) with a mortgage with no monthly payments. As the Reverse Mortgage will generally not be much higher than 60-75% of the property's value, the size of the loan being paid off could be a challenge. The Reverse Mortgage goes in first position and there can not be any mortgage liens behind it...

Reverse "Myth" - The lender owns my home..

Myth - The lender owns my home - The Reverse Mortgage borrower holds title just like on a normal mortgage. Upon sale or passing of the last borrower, the balance (principal + costs+ interest) is due. If there is remaining equity, the borrower(s) or heirs would keep this upon sale. If there is no equity (loan is more than value of the home), this is a non-recourse loan and the borrower/estate/heirs can not owe more than the market value of the home.