Health & Fitness
Reverse Mortgage Misunderstandings - Part 1
There are many misunderstandings about Reverse Mortgages...We tackle some of them
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.
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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
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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