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Real estate financing options for older adult homeowners

Submitted by on 1, February 17, 2011 – 12:02 am3 Comments

By Laura Levy

Our senior population has been hit hard by our current economic downturn. They have taken the double whammy of depreciation in their real estate values and a slashing of their retirement funds. As a result, many seniors have had to alter their retirement plans. Fortunately, reverse mortgage options for senior homeowners have expanded and can provide the financial means to allow the homeowner to maximize their home equity and maintain the quality of life they deserve.

A reverse mortgage is a mortgage loan in which the borrower can access a stream of income from the equity in their home. The money they borrow plus the interest that accrues are a lien that needs to be satisfied upon death of the longest living borrower or upon permanently moving out of the home or sale of the property. The amount of money available to the senior is based on their age and the value of their home and there are no monthly mortgage payments for as long as the borrower lives in the home.

The mix of reverse mortgage products available through FHA’s Home Equity Conversion Mortgage Program (HECM) now includes three options for senior homeowners: HECM Standard, HECM Saver, and HECM for Purchase.

The HECM Standard 2011 is available for seniors who want to maximize access to their equity and are comfortable with the 2 percent up front mortgage insurance program, which is based on the home’s value up to the lending limit of $625,500. This program allows for the largest cash-out option.

The newly introduced HECM Saver offers borrowers the choice to receive a smaller benefit and pay only .01 percent of the home’s value up to the lending limit. This can save homeowners anywhere from $5,000 to $12,000 in closing costs and make reverse mortgages accessible to a broader range of homeowners.

The HECM for Purchase program allows senior homeowners to purchase a home with no credit or income qualification, as with traditional purchase loans, and the senior can live in the home with no monthly mortgage payments. As with all reverse mortgages, the loans are repaid when the senior leaves the home as their primary residence.

Consumers pursue these loans for a variety of reasons. Some do it to finance an active lifestyle in retirement, others because a home needs major repairs or renovations to make it more senior friendly. Others want to maximize their cash flow by eliminating traditional mortgage payments or earn their yearly property tax through the benefit of a reverse mortgage credit line. The flexibility to use your equity to best suit your individual needs makes reverse mortgages a viable financial solution for older adults.

If you are interested in learning more about the benefits and guidelines concerning reverse mortgage, as well as other equity release options available for older adults, please call.

Laura Levy is a Mortgage Planner and Reverse Mortgage Specialist with Bay Area Reverse Mortgage, a division of Holmgren and Associates. She can be reached at (510) 521-6464.


  • The HECM Purchase program is such a great and underutilized tool.
    No qualifying AND no payments? It’s just what the retired folks need.
    california real estate loan

  • tomcharron says:

    Dear Michele:

    This Reverse Mortgage article is actually a ‘sneaky ad’ for Ms Laura Levy and her Bay Area Reverse Mortgage Holmgren and Associates Pitch!

    It would only be fair to have an expert financial planner (not connected to the ‘Reverse Mortgage Banking Community) comment on the down sides of this crazy banking scam in any article you post as ‘news’ from a commercially interested party.

    P T Barnum rules here….’there is a sucker born every minute!!”. Unfortunately seniors are highly susceptible to grand scams on ‘easy’ money….especially when some government ‘backing label…HUD’ is magically applied here thru intense lobbying for federal approval of such.

    The old dictum “if it looks too good to be true….then it is too good to be true” should be activated when a banker or mortgage broker tries to gain control of your home and profit from your ‘sweat equity’ thru selling to you a mortgage with unbelievable up front costs and high compounding interest rates!!!

    Reverse mortgages extract massive amounts of money in up front costs from seniors and rob them and family of prime assets. Not to mention the usual 6% that the mortgage specialist and broker charge for the service!!! Older fixed income seniors should not finance frivolous activities with a reverse mortgage. It usually is most reasonable, when really needed, for most seniors is to sell their property, take their capital gains tax free profit ($250k/single $500k/couple) and move to a rental, senior residence, or buy a home elsewhere where prices are reasonable. They often would be thousands of dollars ahead and have the capital to invest for reasonable income until they pass.

    If an owner engages a reverse mortgage, the owner can live in the home only as long as he/she can pay the taxes and insurance on the property. When the owner dies or decides to sell his/her home the mortgage must be repaid including all accumulated interest and other fees due to the lending bank. At this time nothing is usually left.

    Please don’t let vested interest parties write news articles on issues which bring income directly to same without reasonable counter points in the same article

    Respectfully submitted,


  • C. Parker says:

    I have a background working in the health care industry and have watched seniors and their families at their wits ends trying to keep their parents in place, remaining in their own homes. While a reverse mortgage is not the answer for every senior, it is a lifeline for some.

    While it would not be the first option I would recommend – in some cases it is the difference between a senior being forced to leave their home prematurely and enter what may be a marginal living situation and staying for the remainder of their years. The cost of quality assisted living may be beyond the senior’s reach. They may also not want to leave their beloved neighbors, may have a pet that needs a yard that cannot be accommodated in senior housing etc.. I have seen many seniors quickly decline when forced, for financial reasons and against their wishes, to leave their homes of many years. Do not underestimate the emotional attachment seniors have to their homes. This is not all about the financial bottom line – there is an intangible here that is harder to measure -the psychological and physical well-being of the parent who wants to remain in their home with outside caregivers coming in and who does not want to die in a nursing home.

    In cases where it is an option to consider, I would not hesitate to recommend families explore it. It is something for the adult children or heirs to discuss with their elders in concert with their tax planners and financial advisors.

    After all this IS the senior’s home and if they want to remain in their home at all costs – I think their financial planners and families need to take their wishes into consideration and not just think about what kind of financial hit the estate might suffer.

    As to Ms. Levy – I have known her as a very ethical real estate and mortgage professional in the community for some time. In fact, my husband and I once refinanced a piece of property using her services and found her, frankly, to be the opposite of a high-pressure sales person. I cannot imagine her in any way taking advantage of seniors. To the contrary, I would imagine she brings the seniors’ adult children and financial advisors into the conversation as to whether or not a reverse mortgage is in the senior’s best interest.

    Seems as if this blog editor provides every opportunity for people to give an alternate view – as evidenced by the ability of other posters to comment to articles.

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