Reverse mortgage lets son pay off mother’s reverse mortgage, keep his home

Mortgage broker:

John Holmgren, Holmgren & Associates.

Property type:

Single-family home at The Sea Ranch.

$1.05 million. $558,600. HomeSafe Jumbo reverse mortgage.

8.99% fixed.

A number of years ago I arranged a reverse mortgage for a Sea Ranch homeowner. Her son had moved in with her some years before to take care of her. Mother and son understood that since the loan and property were in the mother’s name her loan would have to be paid off if she was no longer able to live in the home, or passed away. Ideally, at the time the loan was put in

Property value: Loan amount: Loan type:

Rate: Backstory:

place, it would have been in both of their names so that if she predeceased him, he would be able to remain in the home, but he was too young at that time to be a party to the loan.

In late 2021 the mother passed away. The son very much wanted to remain in the home and was now old enough to be eligible for a reverse mortgage that would be used to pay off his mother’s loan.

This loan option was going to be crucial, because the son’s income was limited to a small Social Security benefit and some part time employment income, not sufficient to qualify for a traditional loan for pay off of her loan. In addition, he was in need of additional financial resources to pay living expenses and to meet reverse mortgage cash flow requirements.

While the FHA HECM loan limit had just increased to $970,800, this amount did not provide enough loan proceeds to pay off her loan and provide additional funds for cash flow qualification. As a result we reverted to the HomeSafe program. While this meant that the rate was higher than HECM options, it was obtained with much lower closing costs and sufficient cash proceeds to meet cash flow guidelines.

In some cases it is the desire of family members to retain their parents’ home. When the home is going to be rented, the only recourse is to use other assets or a traditional loan to pay off the parents’ reverse mortgage. When the family members are old enough to qualify for a reverse mortgage, they may be able to use this option to retain the property as their primary residence without the need to make a mortgage payment. This proved to be an essential option for this homeowner.