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Guarding the Golden Years – Reverse Mortgages

Guarding the Golden Years.
Reverse Mortgages

What is a Reverse Mortgage?

A Reverse Mortgage is a popular, but complex, home loan just for seniorhomeowners. If you qualify for a Reverse Mortgage, you will not have to makemonthly payments on the loan. Instead, the lender pays you. Typically, theReverse Mortgage is repaid from your home’s equity when you sell the home,move out permanently, or die. You, or those who will inherit from you, cankeep any sales proceeds from your home in excess of what you owe the lender.

To qualify for a Reverse Mortgage, you must be a homeowner who is at least 62years old. The mortgage on your home must be fully or nearly paid off.Generally, the amount you can borrow depends on the value of your home, theamount of equity you have in the home, and your age at the time of loanapplication.

For example, one of the many reverse mortgage plans available would allow a75-year old homeowner with a home worth $200,000 to borrow $73,201. A 95-yearold homeowner would be able to borrow $210,573 under the same plan.

Choosing the right Reverse Mortgage can give you greater financialindependence and reassurance during your golden years. Choosing the wrongplan could lead to financial disaster.

A word of caution: If you choose a plan that requires repayment on a specificdate, known as a "fixed-term" Reverse Mortgage, you must be sure that you willhave the money to repay the loan on that date. Otherwise, you may have tosell your home and move in order to repay the loan.

Take advantage of free, local Reverse Mortgage counseling to make the rightchoice. Please refer to the list of Resources at the end of this brochure.

How Do I Know If a
Reverse Mortgage Is
Right For Me?

A Reverse Mortgage may be right for you if:

  • you have a regular need for additional living funds;
  • you live on a fixed income, and your only asset is your home equity;
  • you do not plan to leave your home to your children or others who will inheritfrom you.

Consider alternatives
to a Reverse Mortgage if:

  • you want to leave your home, free and clear, to your children or others whowill inherit from you;
  • you have another, less costly means to reach your financial goal. A ReverseMortgage can be an expensive way to borrow money.

What Are Some of
the Advantages of a
Reverse Mortgage?

A Reverse Mortgage can help you maintain your financial independence and anadequate standard of living.

A Reverse Mortgage allows you to remain in your home and retain ownership.

The money you receive from a Reverse Mortgage is tax-free.

What Are Some of
the Disadvantages of a Reverse Mortgage?


Reverse Mortgage options can be confusing and numerous. Get counseling.

Reverse Mortgages are more costly to set up than other types of loans.

Although the proceeds are tax-free, a Reverse Mortgage may impact upon youreligibility for certain "need based" public benefits such as Medicaid,Supplemental Social Security Income (SSI) and MediCal benefits.

What Types of Reverse Mortgages are Available?

There are three types of Reverse Mortgage plans available today: FHA-insured;lender-insured; and uninsured. Each type differs. A Reverse Mortgagecounselor can help you decide which type is right for you and which lenderoffers the program that best meets your needs.

What Questions Should
I Ask if I Decide to Shop
For a Reverse Mortgage?

Use this list of shopping questions:

  • How much money do I need?
  • Is there a way to meet my needs that does not involve getting a ReverseMortgage?
  • Will a Reverse Mortgage make my partner or me ineligible for any governmentbenefits, currently or in the future?
  • Do I qualify for this Reverse Mortgage?
  • How much can I borrow through a particular Reverse Mortgage product?
  • How much will it cost me in fees and interest to borrow this money even if Idon’t have any "out of pocket" expenses?
  • Will I have to sell my house before I die to pay off this Reverse Mortgage?
  • What happens if I die, and my partner is still alive and living in the home;will he or she have to leave or pay the loan off?
  • What happens if I have to go to a nursing home; will the loan become due andpayable?
  • What will I or my heirs have left after the loan is paid off?
  • Are there any early-repayment penalties?
  • What are my obligations under the Reverse Mortgage, such as homemaintenance, property taxes and insurance?

Reverse Mortgage Essentials

Four important things you should do before getting a Reverse Mortgage:

1. Determine if you really need a Reverse Mortgage or if another type of loanwould be better for you. Depending upon your needs and your financialsituation, you may be able to meet your goals with another, less costlyfinancial solution than that provided by a Reverse Mortgage.

2. See a HUD approved Reverse Mortgage counselor-free of charge – to help youdecide if a Reverse Mortgage is for you, or to help you choose among thedifferent types of Reverse Mortgages.

3. Shop around and compare! Not all Reverse Mortgages are created equal. Theyvary substantially in how much cash you can get, what they cost and otherfeatures.

4. Consider whether a Reverse Mortgage might make you ineligible for any publicbenefits you now receive or may be eligible to receive in the future. Forexample, if you currently receive or expect to be eligible for any "needbased" benefits such as Medicaid, MediCal, or Supplemental Social SecurityIncome (SSI), Reverse Mortgage payments will have to be structured so thatmonthly payments will be spent within the month they are received. If not,such payments will be considered "income," and may make you ineligible forpublic benefits. You should contact your benefits provider to ask about how aReverse Mortgage may affect your eligibility.


"Who Can I Call For More Help?"

These agencies provide free, local Reverse Mortgage counseling and areapproved to give mortgage counseling by the federal Department of Housing andUrban Development (HUD).

San Francisco
Consumer Credit Counseling Service
(415) 788-0288 or (800) 777-7526

Alameda County
ECHO Housing
(510) 271-7931

Contra Costa County
ECHO Housing
(925) 679-8023


San Mateo County
Human Investment Project
(650) 348-6660

Santa Clara County
ECHO Housing
(510) 271-7931

Solano County
Vacaville Office of Housing and Redevelopment
(707) 449-5675

Sonoma County
Consumer Credit Counseling Service
(707) 527-9921

Additional (non-HUD approved) counseling is available for free through:

Bar Association of San Francisco (BASF)
(415) 782-8903
BASF will review Reverse Mortgage documents and refer consumers to attorneys

For More Information About
Reverse Mortgages, Contact:

U.S. Department of Housing and Urban
Development (HUD): toll free
(888) 466-3487.

Federal Trade Commission (FTC): write to obtain a free brochure, "ReverseMortgages Fast Facts." Consumer Response Center, FTC
600 Pennsylvania Ave. N.W.
Washington, DC 20580
Or call, (202) FTC-HELP

American Association of Retired Persons (AARP): write to obtain a free guideon Reverse Mortgage borrowing:
Home Made Money
AARP Home Equity Information Center,
601 E. Street N.W.
Washington, DC 20049

Fannie Mae: Call (800) 732-6643 for a free guide, "Money from Home: AConsumers Guide to Reverse Mortgage Options."

National Center on Home Equity Conversion (NCHEC) offers a current list of allpublic and private sector Reverse Mortgage lenders. Send $1.00 and a self-addressed, stamped, envelope to Reverse Mortgage Locator, Suite 115, 7373147th Street, Apple Valley, MN 55124. Also available, "Your New RetirementNest Egg: A Consumer Guide to the New Reverse Mortgages," call (800) 247-6553for information.