Reverse Mortgage Misunderstandings - Part 1

There are many Myths/Misunderstandings about Reverse Mortgages. Here are just a couple:

Myth 1: The lender owns my home

The Reverse Mortgage borrower holds title just like on a normal mortgage. There are two deeds, one to the lender and one to HUD. This basically protects the borrower if the lender goes away, as many reverse borrowers receive monthly payments. 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 cannot owe more than the market value of the home. Heirs can decide to keep the home, and would have to payoff the existing balance of the Reverse within 6-12 months of the passing of the last borrower.  

Myth 2: I can't get a Reverse Mortgage if I have a loan on the property

 Many Reverse Mortgages being done today are being used to pay off 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 cannot be any mortgage liens behind it...With the current maximum HECM Reverse Mortgage at $625,500, it is conceivable that a senior homeowner could owe more than $600,000 in current mortgages and pay those off with the Reverse Mortgage.

Myth 3: There are restrictions on how I can use my funds

The borrower 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...   

Some good resources for seniors:

AARP Driver Safety Program 
1-888-687-2277

Caregiver Support Group (Alzheimer’s) 542-0282

City of Petaluma Transit 778-4460

Earle Baum Center for the Blind 523-3222

Food Bank Senior Brown Bag 523-7900

HICAP (Health Insurance Aide) 800-434-0222

“I’m Home Alone” Phone Program 528-8712

Lucchesi Community Center 778-4380

Mary Isaak Center 776-4777

Ombudsman 526-4108

Para Transit 765-8493

PEP (Low cost housing for seniors) 762-2336

Petaluma Health Center 559-7500

Petaluma Fire (Dispatch) 778-4390

Petaluma People Services Center 765-8488

Petaluma Police (Dispatch) 778-4332

Petaluma Senior Center 778-4399

Rebuilding Together (rehabilitate homes) 765-3944

Redwood Caregiver Resource Center 542-0282

RSVP (volunteer resource) 573-3399 Ext. 117                    

Senior Adult Day Program 765-8490

Senior Dining Site/Meals on Wheels 765-8484

Social Services 565-8250

Sonoma County Agency on Aging 565-5950

Sonoma County Council on Aging 525-0143

Sonoma County Elder Abuse Council 565-5950

Tax Assistance for Seniors (AARP) 794-8252

Click here for the Current Petaluma Senior Center Newsletter