A Dirty Secret Mortgage Brokers
Don’t Want You to Know!
Don't Lose Your Home to a Forced Sale
A very heavily advertised and promoted financial product for seniors is the reverse mortgage. we're sure you’ve seen or heard the many commercials on TV or radio.
We know we have.
Reverse mortgages allow a homeowner to access the equity in their home either as a monthly income or a credit line. The size of the equity line is based on how old the homeowner is and the value of the home.
The homeowner stays in the home for as long as they live or the home is sold. The loan is paid back from the proceeds of the sale of the home.
The reverse mortgage can be a life saver in these tough times in the right situation. The ads and commercials all tell you about the benefits and good things of a reverse mortgage.
But is a reverse mortgage right for you?
What they don’t tell you is that the moment that you are no longer living in your home, the loan balance is now accelerated and due.
Let me walk you through an example. An 85 year old widow took out a reverse mortgage a number of years ago. Her loan balance is now $150,000.
At the time she took out the reverse mortgage, home values were sky high. Remember those days not to long ago?
Now, her home is worth only $250,000. Sadly, she has a stroke and ends up in a nursing home. Her doctor tells her children that she will be in the nursing home probably for the rest of her life.
So they come to see us to help get her qualified for California Medicaid. Unfortunately we tell them that we cannot protect the home from the Medicaid California Recovery process.
Because of the reverse mortgage on the home, the home cannot be transferred to the children.
Here's the dirty secret that they won't tell you. Because mom is no longer living in the home, the $150,000 balance is now due and payable. Either they come up with the $150,000 or they have to sell the home.
Then, when it can’t get any worse, we tell them that now the net proceeds disqualify mom for long term care California Medicaid benefits until they are spent down. Now the kids have nothing.
Most parents tell me that if they have to spend down all of their cash then qualify for Medi-Cal (also known as California Medicaid), that’s OK. But at the very least, they would like to leave the family home to the children.
Unfortunately, in this example, mom is not able to this. No one told her about the
DANGERS OF A REVERSE MORTAGE!
If either she or the children had come to us before taking out the reverse mortgage, we would have told them about this ahead of time.
Maybe a better option would have been for her to sell the home at the higher price, invest the cash and live off the interest. Then if she applied for long term care California Medicaid, we could have structured a gifting program that would have saved at least 80% of the balance for the children.
80% is better than nothing right?
Is this happening to you right now? Are you seriously thinking about a reverse mortgage? Before you sign your life away, don't you think that you should get a second opinion?
I’m Karl Kim, your translator of the long term care California Medicaid system. Let’s work together so you don’t make this same mistake.
Karl Kim is a Certified Financial Planner™, Certified in Long-Term Care, and the President of Retirement Planning Advisors, Inc. in La Mirada, CA. He is a Medi-Cal Specialist and has submitted over 1000 applications with a 99.9% success rate over the past 20 years. He can be reached at 714-994-0599.
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