In-home care paid for with reverse mortgage proceeds

Mortgage advisor: Dominique Stevens, Mayfair Mortgage Advisors.

Property type: Single-family home in Burlingame.

Loan amount: $729,880.

Interest rate: 10%.

Loan type: JUMBO Reverse Mortgage.

Backstory: Our clients reached out to us once they became aware that they were going to significantly need help at home. They had thought that Medicare and Medi-Cal would help them to pay for the care; however, they were surprised at how much in-home care costs, and how little Medi-Cal would pay towards those costs.

Both in their late eighties, neither of the couple wanted to reside in a care home. Care home fees are very high as well. Once they had toured some care facilities and checked into the pricing, it seemed a much better option to stay in their own home and have help with the daily chores.

They had bought their Burlingame home in the 1970s. The home is paid for and free and clear of any encumbrances. Their monthly property taxes were very low as well, so it made no sense to sell the house and move elsewhere, as capital gains taxes would have made a huge dent in the profits from the sale of the home.

They contacted us and we went over all the options available to them to determine the best outcome.

We then prepared their proposal showing several reverse mortgage options that are available to them. They opted for the fixed rate loan, as they preferred knowing that the interest rate would be locked in for the life of the loan. They also learned that they can refinance their reverse mortgage into a lower interest rate if interest rates go down. With our calculations, we were able to show them that even though they would be taking several hundreds of thousands of dollars out of their home, they would still have ample equity to leave their heirs.

The borrowers completed telephone counseling with a third-party HUD counselor. This ensures that the borrowers understand the terms of the reverse mortgage. Once the telephone counseling was completed, we were able to generate their loan application and order the appraisal. Once the appraisal came in, we were able to wrap up their loan and fund it quickly. Our borrowers were relieved to be able to stay comfortably in their home and still have quite a sizable inheritance to leave their heirs.

A reverse mortgage allows adults 55 and older to access their home’s equity and halt mortgage payments forever. The program requires that the home be maintained as the primary residence. As non-taxable income, it does not affect Medicare, Social Security or pensions. Whatever equity is left after the reverse loan is paid off goes to the heirs.