Reverse-Mortgage-Truth.com

To start, let's define each type of loan. The reverse mortgage is a home loan that allows people over the age of 62 to pull out some of their home equity to use for any purpose that they want. The loan may be kept until the homeowner(s) either sell the home or permanently move out. An aspect of this mortgage that is very appealing for many seniors is it does not require any monthly mortgage payment whatsoever for the life of the loan. A reverse mortgage is similar in many ways to a line of credit in that there is a credit limit and the ability to pull cash out and put it back in. The borrower does not pay the monthly interest that accrues as he/she goes. The lender cannot even ask the homeowner for any payments as long as they live in the home, but instead the interest gets added to the principal balance. At the end, the lender collects the total amount that it has lent to the borrower, which includes principal plus interest.

This is the second post in a series. To be continued . . .

Perhaps due to a strong job center, San Francisco is the strongest real estate market in California and has managed to avoid the “declining market” stigma. The median price has declined by just 1.5% in the county and city of San Francisco. Because many homes are valued at over a million, most reverse mortgage lenders offering jumbo loans will require two independent appraisals, but none have announced automatic loan amount reductions. Hopefully for the seniors who live there, the San Francisco real estate market will maintain its current strength.

More on San Francisco Reverse Mortgages can be found here.

Another potential drawback of Medi-Cal is the possibility that they will seek repayment from the senior’s estate after they pass away. They may file a lien on the senior’s home to guarantee repayment. In this way, Medi-Cal is like a reverse mortgage except that you have less control and potential legal hassles. It is best to talk with an elder-law attorney to discuss these issues.

Interestingly, as of press time, Medi-Cal does not consider a reverse mortgage home equity line of credit to be assets that count toward disqualification. So, in cases where one spouse will stay at home, Medi-Cal may be used in conjunction with a reverse mortgage to pay for the other spouse’s nursing home care. For an informative article on this subject, click here.

There are a myriad of other non-governmental insurance plans that may cover the cost of medical care. If you need care now or in the near future, you have probably already called your insurer and determined what coverage, if any, they will provide. As you can probably guess, finding new insurance coverage when you already need its benefits is next to impossible. For immediate financial needs, you may want to consider a California reverse mortgage. But if you are just planning for the future, and want to look into regular health insurance coverage, Medicare supplemental insurance or long term care insurance (which I highly recommend), contact a qualified professional.

This is the third and final post in a series.

Another option is to ask your children or other relatives for money rather than get a reverse mortgage. And fortunately, they often want to help if they are able. Here are some important factors to consider.

Aside from the obvious loss of financial independence, pride of taking care of oneself and the potential creation of family conflicts, there are, in fact, hard costs to consider. If your relatives must sell some of their investments, they may owe capital gains tax and will lose the future return on those investments. If they are fortunate to make enough money from their paychecks to support you, they may be diverting income that could otherwise go into THEIR retirement accounts. Not only would they lose the future investment returns, but if their retirement account (such as a 401k) receives pre-tax money, they are losing an additional 25%-45%, depending on their income tax rate.

Finally, do not minimize the risk of spending down your savings and eliminating your financial cushion that allows you to comfortably cover the unforeseen expenses that will arise. A reverse mortgage line of credit could offer a far better financial cushion.

Using the funds that you have on hand can be a good way to accomplish your goals if those funds will last for the foreseeable future and if using them will not cost you more than would a reverse mortgage. Just be sure to add up the realistic cost of such a decision, and compare it to the other options before proceeding. Be sure to ask your lender for a reverse mortgage quote.