Reverse Mortgages Equal Independence For Seniors

Posted on July 2, 2010 by Beth Paterson, CRMP

As we look to celebrating the independence of our county let’s also look at how our seniors can celebrate their own independence. Defined as “sufficient income for comfortable self-support; a competence” at dictionary.com, independence is important to seniors.

When we talk with our clients we hear they want to be able to enjoy their retirement and maintain their lifestyle which includes having their independence. So how can they do this if they are living off their Social Security and if they have retirement investments but they have dropped in value?

Even though as one ages some help may be needed, they can still maintain their independence. A reverse mortgage can help provide this independence. After Edna did her reverse mortgage she said, “Now I have my dignity back and my independence.”

Some instances where the reverse mortgage can help one remain independent include having funds for home repairs, going out to lunch with friends, traveling, visiting family across the country, purchasing a new car, paying medical bills or for medications; paying for help with housework, meal preparation, yard work or transportation, whatever they desire.

Or if one needs more help to remain in their home they would have the funds to pay for the assistance from a home care agency to do so. While some additional assistance may be needed seniors can still have a sense of independence if they have the funds to get the additional help and choose the agency they wish.

Seniors have sometimes used their credit cards to fund their lifestyle or pay their bills, others have used a conventional home equity mortgage or a line of credit. And others look for additional cash by applying for a conventional home equity mortgage but don’t qualify.

The reverse mortgage can benefit here too. Interest rates on credit cards are high. Having the reverse mortgage can reduce their dependence on their credit cards. They usually don’t qualify for a conventional mortgage with today’s lending requirements especially since their only income is Social Security. Even if they do qualify or currently have a home equity mortgage or line of credit, they have to make payments which can be difficult on a fixed income or when “life happens.”

Another Minnesota reverse mortgage borrower said, “With a reverse mortgage you begin to have independence anew and you begin to feel more secure. Being free from monetary anxiety, you have better control over spending your equity.”

A reverse mortgage is a mortgage with special terms for senior home owners 62 and older to allow them to remain in their home. The loan amount is determined by the appraised home value (or FHA lending limit), the age of the borrower, and an Expected Interest Rate. Let’s review the facts of reverse mortgages:

The title stays in the borrower’s name same as with any mortgage. The borrower owns the home, no one else does.
Income and credit scores are not required for the HUD insured Home Equity Conversion Mortgage or HECM, the most common reverse mortgage.
The borrower may be able to stay in their home as long as it’s their primary residence or until their 150^th birthday.
Lower interest rates than other loans – historically the reverse mortgage interest rates have been lower than conventional loans, lines of credit and credit cards.
A borrower won’t lose their home because they can’t make a mortgage payment – they don’t have to make monthly payments. They are however, as with any loan, responsible for taxes, insurance and maintaining the property and abiding by the terms of the loan agreement.
The reverse mortgage funds are generally considered tax-free (although if proceeds are used for certain purposes taxes may apply – consult with a tax advisor).
The proceeds are not considered income so Social Security and Medicare are not impacted and one may still be able to receive Medicaid.
The HECM is government insured and guaranteed to be available for borrowers.
Allows access to more funds without paying additional closing costs – there is a growth rate with the line of credit and monthly payment options with the adjustable interest rate program.
There are no out of pocket costs other than the cost of the appraisal.
There are no prepayment penalties.
Borrowers or their heirs get to keep any remaining equity after the loan is paid off.
The loan is non-recourse which means there is no personal liability to the borrower or their estate as long as they are retaining ownership.

Paying off a mortgage on her home, Judy stated, “I truly believe in reverse mortgages, especially for someone like me with a limited income. I received enough from the reverse mortgage to pay off some other bills and still had a little to put into a “line of credit” account. Some of the bills I am paying are credit card debts which have a very high interest rate. It’s a good feeling to be able to do that. It makes bill paying each month less stressful.” Now this is senior independence.

Have a wonderful time celebrating the independence we have in this wonderful country of ours. And keep in mind that a reverse mortgage equals independence for seniors.

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-m7

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

A Minnesota Reverse Mortgage Borrower Speaks Out On The Benefits With Her Reverse Mortgage

Posted on June 12, 2010 by Beth Paterson, CRMP

“I’m a happy consumer of reverse mortgages. I feel that it’s had an unjustly bad name in the past, at least I’ve heard under currents of ‘oh, you wouldn’t like that.’ Well let’s get at this logically. I’ve had a good experience with it and I like Beth’s approach. So I wanted to share my experience and what had changed in my life.

“Life was happy and good with a family and a career. I was all happy and good with the insurance that goes with a nice job. When retirement time came I had a fair pension and that with Social Security were going to see me through things.

“But that didn’t match my goals. I wanted to travel more when I was retired and visit my now expanded family and I was getting charges of $400 – $500 for tickets 2-3 times a year plus indebtedness for rewiring in the house, I wanted to remodel things and was running across some fascinating new hobbies. So I wanted to have new hobbies and travel. And do what was the healthiest thing I could think of on earth which was having a very right good time now and let the future take care of itself if I took care.

“So that led me to talk to some friends when I was running low on funds. Several people referred to the fact that Beth Paterson was quoted on reverse mortgages. To be quoted was quite a credential. I had a meeting with Beth. I was 73 at the time. I was undecided at the time so I waited. Time changed and I still had a lot of ambition and 75 came along and I wanted some improvements in my home and I was confidently that I could likely spend 10 or more years happily in my home if I had home health care. That is a big deal to know when you are 70 something to know that if you fall and need some months of assistance.

“When I talked with Beth the 2nd time it all came together. I was very happy with the amount of care she spent with me. My family was able to call her and get answers to our questions and they were pretty astute questions. Beth took the time to answer every one of them. I had shopped around and I stayed with Beth.

“My life changed from uncertainty on how I was going to pay my electrical bills, and whether I could even stay in this community or whether I needed to move to assisted living which meant moving. That wasn’t the preferred path. I was sure I could stay in my home. I was sure I could get the reverse mortgage loan. And now I was able to get a nice low rate.

“I immediately found that I could get relief from my old small mortgage. [The reverse mortgage needs to be in first lien position which means any current mortgages or liens need to be paid off. This eliminates mortgage payments because there are no payments required on the reverse mortgage. Borrowers are responsible for property taxes and hazard insurance.] The relief was so great that I could now stop worrying about how I could pay this within my income. So I left my Line Of Credit alone – didn’t use it – just the relief for paying off the old mortgage and the old debts and some ability to understand my budget and handle it better.

“Now I have my dignity back and my independence. And my children are heaving sighs of relief because they aren’t worried about me any more – I’ve answered some of their questions: where I do I want to be cared for as I age. They aren’t going to be blind-sided.

“I was very pleased with what happened.”

Edna, who took out her Home Equity Conversion Mortgage (HECM) in 2008, shared this story during a presentation where she joined me recently at a Minnesota senior resource fair workshop.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Using The Reverse Mortgage As A Tool To Strategically Manage One’s Assets

Posted on June 6, 2010 by Beth Paterson, CRMP

Dorothy closed on her Home Equity Conversion Mortgage (HECM) reverse mortgage in 2006. Now four years later during a presentation where she joined me at a Minnesota senior resource fair workshop , she shared how the reverse mortgage has been a tool to strategically manage her assets and the benefits she has received from her reverse mortgage. Here’s what she had to say.

“I have a single family residence and have lived there for many years and working and wasn’t looking too much to the future. I ‘knew’ Social Security was going to take care of me… my mother had gotten by on it and I figured I would too.

“I had worked part time as a travel escort and the travel bug had bitten me through the years. I retired at 65. While the career line I had allowed me to take extra vacation time to escort tours what it didn’t do was provide a pension. So I had no hospitalization or a pension when I retired. I didn’t face those facts right away. I had invested and purchased stocks over the years in modest amounts. I figured that would be my answer to any and everything. When I wanted to travel I just cashed in part of a stock and I took off and did some great fun things.

“However we know the stock market took a plunge a couple of times and what I had was back down to half or less than what I had built up. Also I was having to use this in addition to my Social Security income. Fortunately I was able to have paid off my mortgage by the time I retired so I didn’t have those payments. I thought it would be easy street.

“I had a house paid for and was able to get a line of credit from the bank. Anything I wanted to do I would I just borrow the money on the line of credit. After that climbed I would cash some stock in to pay the line of credit.

“Pretty soon I needed a car. I took out a loan on the car. Those payments got kind of high. Pretty soon I’m paying the line of credit and the car payment. And I was using up my stock portfolio. I was owing more to the bank than I had stock to pay off all this line of credit. The stock broker I was talking with said, you have your house paid for, the best thing I could do would be to get a reverse mortgage.

“Luckily I was able to meet up with Beth Paterson. We talked so I would understand the program. The man I had worked for was a very astute business man and had run a mortgage company. So I took the information to him and asked if there was anything that looked doubtful to him; is there anything that I don’t see or is this something I should do? He said, ‘It’s the best thing in the world for you. I can’t advise you to do anything better for you.’

“I have my reverse mortgage. I decided that as long as I was getting my Social Security and didn’t have to touch my stock, I wanted a reverse mortgage line of credit. I didn’t want a lump sum. My reverse mortgage line of credit would grow at nice increments – it was growing faster than my stock portfolio was growing. [The reverse mortgage line of credit grows at .5% more than the interest on the loan. For example if the interest on the loan is 2.5% the growth rate is 3% on funds left in the line of credit.]

“I also decided to take a minimal monthly payment. Now I’m going to get that payment until I’m 150. I’m going to be 83 this year and I’ve got my mind set that I’m going to live to 150 so that I can get that last dollar from HUD that I’m helping to pay into on this insurance program. [Note the due date listed on the reverse mortgage recorded at the county is the 150th birth date of the youngest borrower.]

“The reverse mortgage has given me a great feeling of security. Because if I want to take a trip I just send a fax in and request the amount of money I want. I don’t have to touch my stock. My line of credit is going up every month as long as there are funds there. It’s much better than CDs.

“I’ve done home repairs, this winter I had to replace my car and it turned out I couldn’t use my driveway so I’ve taken some funds to get my driveway repaired. My yard needed some attention that I had overlooked because I didn’t want to spend the money. So I’ve taken some funds for that too. I still have a nice sum in my line of credit and I haven’t had to use my stock.

“I watch the market go up and down and it’s not life and death like it had been before when I knew I just had that stock and when it was gone then what would I do.

“It’s worked wonders for me. I’ve been able to take trips with the money, repair my house, re-roof it, and do this and that. It’s given me ease of mind and it’s certainly helped my kids because at one point I think they thought they would have to help me financially and they weren’t looking forward to that. Now that worry is off their mind. So as long as I can, I will stay in my home, and that’s what I plan to do.”

This is one example of how a reverse mortgage has made a positive difference in the life of a senior and allowed her to strategically manage her assets during her retirement years.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Do You Understand The Reverse Mortgage Closing Costs?

Posted on May 24, 2010 by Beth Paterson, CRMP

Signing Reverse Mortgage Application As with a conventional mortgage, there are costs associated with a reverse mortgage. While perceived as high, once understood you’ll see the reverse mortgage costs are comparable to a conventional loan. Most people don’t understand the fees, what they cover or why they have to be paid with a conventional loan either, they just accept them as part of doing a loan.

One difference is that with the HUD insured reverse mortgage, the Home Equity Conversion Mortgage (HECM), HUD regulates the fees and does not allow marked up or “junk fees,” borrowers only pay the actual costs.

To get clear, let’s understand what the Minnesota fees are and what they cover.

Fee	Explanation	Cost/Charge
Origination Fee	Covers the lender’s time and costs associated with originating the loan including: loan officer’s and staff’s salary, administrative costs, business overhead (computers, office space, utilities, health insurance, office supplies, marketing, processing, underwriting, etc.) (Note processing and underwriting fees are generally additional fees on conventional loans but have to be included in the origination fee on FHA reverse mortgages loans.)	HUD sets guidelines for the origination fee: Maximum of 2% of the first $200,000 of the home value or lending limit, 1% on the balance thereafter with a cap of $6,000 or a minimum of $2,500.
FHA Mortgage Insurance Premium	A required charge from FHA because they are insuring the loan. Keeps the interest rate lower, allows more to be borrowed, guarantee funds are available, and covers risk so borrower or heirs are not personally liable.	2% of the property value or mortgage lending limit, whichever is less.
Appraisal	Fee for FHA licensed appraiser to determine the market value of the property. Includes a management fee for an independent company to order the appraisal.	$450 – $500
Repair Administration Fee	All loans with repairs are charged an administration fee for overseeing that the repairs are completed, ordering inspection, processing payments, etc.	1.5% of the repair bid
Credit Report Fee	This is to check if there are any liens or judgements against the property or person that would need to be paid or other contradictory information.	$18 – $20
Flood Certification Fee	For verifying whether flood insurance is required or not.	$15 – $20
Courier Fee	To send pay offs to a current lender if there are any.	Approximately $30 each
Counseling by Third-party HUD approved counselor	A fee may be charged to the borrower for counseling services as long as it does not create a hardship. The counselors must make a determination about the borrowers ability to pay which may include factors such as income and debt obligations – HUD recommends a written procedure for this. Counselors must inform borrowers of the fee structure in advance of services and cannot be turned away, nor the counseling certificate be withheld based on failure to pay. The Counseling fee may become part of the costs at closing.	Up to $125 allowed by HUD
Document Preparation Fee	Charge for preparing the loan documents for closing. A specialized company prepares the loan package.	$100-$125
Escrow, Settlement or Closing Fee	Charged by the title company for handling the title work and closing of the loan.- – – – – – – – – – – – – – – – – – – – – – – – – – – – – -Sometimes there is an additional signing/notary fee or an additional fee for going to a borrower’s home.	Generally $250 – $350- – – – – – – – – – – – – – – $125-$200 signing/ notary fee
Abstract or Title Search	This charge is for searching the county records.	$150-$185
Title Examination	This is for the examiner to review the title and put the commitment together.	$135-$150
Title Insurance	Title company’s insurance on the property guaranteeing clear ownership and protect lender if there is a defect in the title. Different than owner’s title insurance policy.	Based on property value.
Recording Fees	Fees for recording documents with the county such as mortgage, deeds, county taxes, bankruptcy, name change due to divorce or loss of spouse	$46 each + a $5 conservation fee
County Tax	Mortgage Registration Tax required in Minnesota and collected by the county.	Based on Principal Limit
Survey/Plat Drawing; Name & Assessment Search	Fee for obtaining and reviewing the plat drawing; Fee for searching names and assessments on title	$60; $30; $30 = $120 combined (higher for some counties)
Fees Paid by Lender to Broker such as Yield Spread Premium; Service Release Premium; Lender Paid Broker Compensation	Brokers/originating lenders are paid in two ways, one by you (the origination fee) the other by the lenders. Lenders pay brokers/originating lenders compensation for submitting loans to their company. This compensation also covers the broker’s/originating lender’s time and costs associated with their running their business.It does need to be disclosed on the Good Faith Estimate. Note that federally chartered banks do not have to disclose this information to borrowers even though the same compensation is paid.	This is NOT A BORROWER EXPENSE!To disclose this to you, on the GFE it will be shown as a fee then credited back so it is not actually charged to you.

As the RESPA (Real Estate Settlement and Procedures Act) changes effective January 1, 2010 a Good Faith Estimate (GFE) can ONLY be provided with an actual application. It is no longer allowed for the informational or quote package to include a GFE.

Information (in addition to the name, birthday, property information, current loan details,) that will trigger the application include the Social Security Number, Monthly Income, assets, debts, any other pertinent information. This information should NOT be provided until lender is chosen and ready to proceed with an application. Once lenders have this information they may start processing the loan.

Note that the fees, other than the Appraisal and possibly the counseling fee, are wrapped into the loan so there are no other out of pocket costs.

Being clear and having an understanding of the reverse mortgage costs helps you make better decisions and takes the fear away from the reverse mortgage.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Basics of Reverse Mortgages – On The Radio

Posted on May 1, 2010 by Beth Paterson, CRMP

This past week I had the pleasure of being a guest on the radio show, “The Unexpected Caregiver” hosted by Kari Berit. We covered the basics of reverse mortgages to clarify the facts and share some stories of Minnesota reverse mortgage borrowers and how they have benefited from a reverse mortgage. Rather than writing this blog post I thought I’d share the link to the show for your listening: The Unexpected Caregiver – The Reverse Mortgage Basics with Beth Paterson – Part 1

Next week I will again be a guest on the radio show when we will cover the myths of reverse mortgages. Be sure to come back and check out this show to learn more about reverse mortgages.

Kari was a great host and deligtful to work with. In addition to Kari hosting the radio show she is an author, speaker and coach. Her book, “The Unexpeccted Caregiver” is full of ideas and resources to use as a caregiver. I love her book and highly recommend it. You can find more information at her website, www.TheUnexpectedCaregiver.com

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Reverse Mortgage Helps Minnesota Senior To Be Prepared for Future

Posted on April 17, 2010 by Beth Paterson, CRMP

Reverse Mortgage Helped Bob Be Prepared

Bob’s wife passed away so her Social Security was no longer received. To replace the 2^nd Social Security check his financial advisor suggested a reverse mortgage so he could stay in his home and maintain his lifestyle.

We met and discussed his situation, the facts of the reverse mortgage and how it would benefit him. During his decision period, a friend suggested he sell and move into a senior apartment. But he wanted to stay in his home where he had lived for many years and with his many memories. He also wanted to keep his dog, his loyal companion. Besides he decided that moving and selling wasn’t cheaper than staying in his home and living in a senior apartment meant he’d have to make monthly rent payments which would not improve his cash flow which was his goal.

A reverse mortgage is a mortgage like any other mortgage, using the equity in one’s home, but has special terms for senior homeowners 62 and over. There are no income or credit score qualifications and no monthly payments required.* (See below for Financial Assessment requirement.) Senior homeowners maintain the title as the reverse mortgage lender does not own the home. Borrowers are responsible for paying their property taxes and insurance as well as maintaining the home. Reverse mortgage borrowers are highly protected – more so than with any other loan.

The HECM Adjustable Rate program allows for borrowers to receive their funds in monthly payments, line of credit, lump sum or a combination of these. The monthly payments can be structured as tenure payments, received as long as borrowers occupy home as their primary residence, or as they need. The line of credit grows so more funds become available in the future. There is also a HECM Fixed Rate option which is favorable if one is pulling all their funds out in a lump sum.

As a non recourse loan there is no personal responsibility to repay the loan as long as the borrower or the estate is not retaining ownership. This means if the loan balance when due and payable is $200,000 but the home can only be sold for $150,000 the borrower or the estate do not have to come up with the $50,000 as long as they are not retaining ownership. The loan is generally repaid from the sale of the property when the home is no longer the primary residence of the borrower, usually when they move, die or sell. If the home is sold for more than the loan balance the remaining equity goes to the borrower or the estate.

In Bob’s situation, the reverse mortgage paid off his current conventional mortgage and eliminated his mortgage payments – this improved his cash flow. Then Monthly Payments were set up to add the extra money he needed each month to maintain his lifestyle. Additionally funds were left in the line of credit for future needs.

A summer after he did his reverse mortgage he used some of the funds to take a desired vacation to Yellowstone National Park with his nephew – creating memories for both of them. After he returned from his trip Bob called me to share how happy he was that he was able to take the trip.

Then, as many of my borrowers do, recently he called again. As we were chatting he said that I wouldn’t recognize his house because he’s done some upgrading. In addition he had the home modified so it would be wheelchair accessible. While he doesn’t need this now, he’s prepared for the future when it will be needed. The joy in his voice showed.

Even though he didn’t have his wife to share his life he is able to have the funds to maintain his lifestyle and be prepared for his future in his home. Bob is enjoying his live with security, independence, dignity and control.

*In April 2015 a Financial Assessment was implemented to determine borrower’s ability and willingness to pay property taxes and insurance into the future. This safeguard help make the reverse mortgage more sustainable so borrowers can remain in their home.

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-iz

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Let’s Get Real About Equity Required For A Reverse Mortgage

Posted on April 4, 2010 by Beth Paterson, CRMP

It is a common belief that one has to have a lot of equity in their home in order to do a reverse mortgage. In reality a reverse mortgage can be done if there are enough proceeds from the reverse mortgage to pay off any current liens. If there aren’t enough reverse mortgage proceeds if the borrower can come up with the difference a reverse mortgage can still be done and benefit them.

The Reverse Mortgage improves cash flow because one doesn’t have to make mortgage payments. Even if the reverse mortgage proceeds are used to pay off current liens the senior’s cash flow will be improved because they will have eliminated their mortgage payment.

For example, Wayne was struggling to make his mortgage payments of $1,200 a month. The reverse mortgage proceeds were just enough to pay off his current liens. While he didn’t have funds available from the reverse mortgage beyond paying off the mortgage, his cash flow improved by $1,200 a month because he no longer had to make the mortgage payments.

When we ran the calculations for Minnesota home owners, Jerry and Dorothy the reverse mortgage proceeds were short $3,000 to pay off their current mortgage. They chose to pull some funds from their savings so they could do the reverse mortgage and eliminate their mortgage payments – a benefit and savings in the long run. (Note that HUD, who insures the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM) does not allow the difference to be from another loan or credit cards. If the funds are coming from an outside source, not from your own resources, then it must be a gift, not a loan to be repaid.)

If one is having a hard time making the payments and facing foreclosure the revere mortgage may be the solution in saving their home. Because income and credit scores are not considered to qualify for a reverse mortgage, the reverse mortgage may be a solution. If reverse mortgage funds are not enough to pay off the current loan, we work with foreclosure and housing counselors and lenders to receive a short payoff using the reverse mortgage as the funds to pay off the current mortgage.

If one is unable to handle monthly loan payments of their mortgage or credit card payments, a reverse mortgage may be the solution. Or maybe one chooses not to make monthly payments any more. A reverse mortgage may be the solution for this situation also. Once the reverse mortgage pays off one’s current lien(s) or mortgage(s), there are no more monthly payments.

Minnesota borrower, Dave said he did the reverse mortgage “to remove a monthly payment from my budget.” Adding, “A reverse mortgage means I’ll have a place to live even in case of serious illness.”

So don’t dismiss the reverse mortgage thinking you don’t have enough equity. Consider the option and see if there is a way that the reverse mortgage may benefit you.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Why are you so afraid of reverse mortgages?

Posted on March 28, 2010 by Beth Paterson, CRMP

I had a call the other day from a daughter who was inquiring about helping her mom who owns her home but is currently in a nursing home. When I mentioned “reverse mortgage” she stated, “I don’t want her to get a reverse mortgage.” Before I could even get a better understanding of the circumstances to see if a reverse mortgage was even an option the conversation ended. With her mind already made up that reverse mortgages “are bad” she obviously didn’t even want the facts.

When a home health care aid, financial advisor, attorney or other professional suggest a reverse mortgage they often can see the “wall” go up and the resistance along with the response, “Oh no, I wouldn’t do that.”

Comments on articles and Blogs or in discussions show lack of information and belief of the misinformation about reverse mortgages. As I have often stated and posted in my Blog, there are many misconceptions about reverse mortgages. So why are you judging them and afraid to get the facts from an expert?

I’ve had seniors tell me that their friends have said they shouldn’t do a reverse mortgage. When I’ve asked them “Why?” the response I receive is “We’ve heard bad things about them.” “They are a scam.” But when I ask what those were or why they think this, they have no response – no real documentation or knowledge of what is bad about reverse mortgages or why they think they are a scam. It is all based on fear and misinformation.

Are you afraid to go to the doctor when treatment can make a difference for a health condition? Are you afraid to go to an accountant or attorney when they can help your circumstances? Why are you afraid of a reverse mortgage when it could make a difference in your life?

Edna explains her experience with the reverse mortgage with this statement: “After retiring I found that my income was too little for the active life I was used to, with trips to family, and a modest vacation each year. But bills were piling up and I needed a real solution if I was to stay in my home! I turned to Beth Paterson for information and was very pleased to learn there were still good choices for my situation and I could stay in my pleasant home avoiding a move! Beth your help was great! My children thank you for the time you took to explain things for them as well. I have my dignity and security back again. What a relief!”

Maybe your fear is based on the unknown. Maybe it’s based on misstatements you’ve heard. You don’t have to be afraid of reverse mortgages! Let’s look at the facts to ease your fears:

A reverse mortgage is a mortgage just like any loan against the home but it has special terms for seniors 62 and older.
The lender or bank does NOT own the home – YOU OWN THE HOME, you keep the title!
There are no income or credit score requirements to qualify.
No monthly payments required.
There is no limitation on how the funds can be used.
More options – Funds can be received in monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these.
Social Security and Medicare are not affected because it is a loan, not considered income.
Medicaid (Medical in Minnesota) can still be received with the reverse mortgage.
Borrowers can stay in the home as long as it is their primary residence or in the case of a couple as long as one borrower is still in the home as their primary residence. The due date on the mortgage is the youngest borrower’s 150^th birthday.
At the time of sale if the home is sold for more than the loan balance, the borrower(s) or their heirs receive the difference. The bank does NOT keep the difference!
The loan is non-recourse which means there is no personal liability to the borrower or their heirs if they are not retaining ownership. So borrowers or their heirs don’t have to come up with the difference if the loan balance is higher than what the home is be sold for as long as they are not retaining ownership. Borrowers are not leaving a debt to their children.
Just like any mortgage, borrowers still have the title and are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.
A reverse mortgage is a mortgage just like any other mortgage where the borrower is using the equity of their home to meet their needs and desires now.
As borrowers use the funds/equity and are not making monthly payments the loan balance increases meaning because they used the money now, there will be less available when the loan is being repaid. (With a conventional mortgage one is using the equity but making monthly payments which repays the interest and a portion of the principal each month.)
Fees are regulated and only HUD allowed fees are permitted with no mark-ups or junk fees. Even though many times they are considered expensive or high they compare to conventional loans, in fact the difference comes down to the FHA Mortgage Insurance Premium. You can see a comparison of the costs in my article, “Reverse Mortgage Costs – High or Mythical?”
FHA offers and insures through HUD the majority of reverse mortgages known as the Home Equity Conversion Mortgage or HECM, making it the most highly regulated mortgage available.
HUD insuring the reverse mortgage provides advantages including:
- Guaranteeing the funds are available for you.
- Guaranteeing the lender against default or shortfalls which means the interest rates are lower (currently under 4% on the adjustable rate; 5.56% on the fixed) compared to other mortgages.
- Providing a line of credit growth rate (available only with reverse mortgages).
- Insuring as a reverse mortgage it is a non-recourse (no personal liability) loan.
The HECMs are highly protected. See my Blog article “You Need To know Reverse Mortgage Borrowers Are Highly Protected.”

No other loan has as many advantages, protections or benefits to seniors like the reverse mortgage! So are why are you so afraid of reverse mortgages?

About her reverse mortgage, Corine says, “Having a reverse mortgage has taken some of the fear away that I had for the future. I have more means to meet future needs. My experience with the reverse mortgage was most positive. Beth was wonderful and most informative. Very patient and steadfast. I felt I could really trust her to safe guard my interests.”

Kay has this to say about her reverse mortgage, “Steve was extremely knowledgeable and helpful throughout the whole process. I never felt pressured to make the decision by I am very glad I did it, particularly since the volatility of the stock market pretty much wiped out my IRAs! Thank you so very much.”

If you still have your fears of reverse mortgages after seeing the facts and testimonies of those who have benefited from them, contact us so we can address your concerns and provide you with the facts. You shouldn’t have a fear about reverse mortgages.

Everyone’s situation is different and as you do with an accountant or attorney you discuss your situation and get the facts and potential solutions. As a type of home equity mortgage with special terms for seniors, the facts of reverse mortgages should be received from a reverse mortgage expert to determine if it is right for your situation. At least accept the fact that it could be an option and don’t be afraid of them. A reverse mortgage may just improve your life during your retirement as they have done for hundreds of thousands of seniors.

To help overcome your fears, read more stories on how reverse mortgages made a difference for those who did one:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Food For Thought To Fulfill Key Messages of Social Work Month 2010

Posted on March 19, 2010 by Beth Paterson, CRMP

During March we recognize and honor Social Workers for the value they bring to our seniors. In a variety of roles, with their knowledge and experience in providing resources social workers assist our seniors. The National Association of Social Workers provides a list of Key Messages for Social Work Month 2010. These include inspiring to improve lives and assisting with problem solving as well as resolving issues that may negatively impact the community. I’d like to offer some food for thought tying into these messages.

Ninety-three percent of seniors want to remain in their home. They are comfortable living in the home and community with their memories where they raised their children, know the neighbors, are familiar with the grocery store and the pharmacy. They feel safe and warm in their familiar surroundings. With the home as their identity it gives them comfort being in their long time home. So let’s talk about a couple ways to help fulfill the desires of seniors, improve their lives and help them stay in their home and their community.

Read rest of article at Home Instead Senior Care Burnsville or Home Instead Senior Care Hastings

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Minnesota Reverse Mortgages SIDAC

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Tag Archives: Care Management

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