Reverse Mortgage Misunderstandings - Part 2

This is a continuation of the discussion of some myths concerning Reverse Mortgages. I hear a different misunderstanding everyday. Some seniors as well as their family and advisors may be missing out of possible benefits due to some of these myths/misunderstandings.

You can see Part 1 of the series here -

Myth 4: The Reverse Mortgage is Only for Poor Seniors

The Reverse Mortgage can definitely benefit senior homeowners with limited assets and income to increase their quality of life, but seniors who have assets and a stable income have also found uses for the Reverse Mortgage. These include estate planning, preparing for future expenses such as medical care, investments such as a rental or vacation property and assisting family members.

The flexibility of the line of credit can be used for purchases or investments with no monthly payments. Some seniors will have a Reverse Mortgage in place to be accessed later if assisted living costs occur. This may be important especially if there are future concerns of mental issues.  

Myth 5: You Must Have Good Credit to Obtain a Reverse Mortgage

At this time, there are no minimum credit score requirements to obtain a Reverse Mortgage, unlike the conventional (“forward”) mortgages. A senior homeowner could have a 300 FICO score and still qualify for a Reverse Mortgage, where they may need 680+ to get a decent conventional loan.

For many seniors, the Reverse Mortgage can be an alternative if their credit scores do not meet the standards for a conventional one. There has been talk of changing this a bit and lenders could be giving a senior’s credit report a more detailed look in the future.

Myth 6: If the Loan Amount Grows to be Greater Than the Value of the Home, a Senior Can be Forced Out of a Home…

The Reverse Mortgage is a non-recourse loan, meaning the borrower cannot owe more than the property is worth. A loan balance greater than the value of the home does not change the benefits (ongoing income, no monthly payments, line of credit access) for the homeowner.

As long as the homeowner continues to pay property taxes, property insurance and maintains the property, the Reverse Mortgage stays in place with unchanged terms. The upfront and ongoing FHA insurance protects the lender in the case of the loan being greater than the value.

I have recently updated my website. It now has a lot of information about Reverse Mortgages as well as a video of our company spokesperson, Pat Boone (remember him?), discussing the Reverse Mortgage.

Check it out at www.NorthBayReverse.com 

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