It is estimated there are more than 11,200 Americans who will turn 65 every day from 2024 thru 2027; 4,088,000 yearly.  Many of these people will continue to work until a retirement age of 67 and beyond to improve their monthly Social Security or pension benefits.  In 2024, the maximum Social Security benefit for a person aged 67 pays $59,520 annually. This is not sufficient income to qualify for any type of financing or to sustain a quality of life anywhere in California.  Seniors experience a significant income reduction when they retire and must plan accordingly, especially if they are still carrying a forward paying traditional mortgage secured on their home. New sources of income and financial security must be considered to avoid outliving their assets.   

Over the years, there has been much confusion and concern about obtaining a ‘reverse’ mortgage loan by seniors who are preparing for retirement or are currently in retirement. The loan programs have improved since the last decade and many California homeowners now have more options for retirement years. Reverse mortgage products today are diverse and create new opportunities for supplementing cash flow based upon the value and equity on a primary residence. If you are 55 or older, you could be eligible to free up your monthly cash flow with one of several different negative amortization loan options. Homeowners can utilize up to 40% of their primary home’s equity for retirement living to accomplish the following with tax free loan proceeds:

•  Pay off existing mortgage balance with no payment due.

•  Make upgrades or repairs to the home.

•  Fund in home health care.

•  Travel more.

•  Provide a living inheritance to provide for children or grandkids.

•  Continue holding title in your living trust. 

There are several types of reverse mortgage options with most of them being a part of the Home Equity Conversion Mortgage program (HECM) that is federally insured through the Federal Housing Authority. There is an initial up-front mortgage insurance premium (UFMIP) included in the loan at 2% with a maximum loan amount of $1,149,825. The annual mortgage insurance premium (MIP) renewal is 0.50% and deferred to the loan’s principal balance. This program is more costly and often deters borrowers understandably because of the UFMIP and MIP charges.  

As a result, there are new “Reverse” loan programs that are less expensive and offer:

•  Hybrid interest only payment with no payment after 10 years.

•  Jumbo Neg-Am loans up to $4M with NO UFMIP/MIP. 

•  Purchase money Reverse loan with no payment.

The loan funds can be received as a one-time lump sum, a Home Equity Line of Credit, or timed installments. Monthly interest is charged like a traditional mortgage however it is added onto the principal balance, making it a negative amortization loan with an increasing principal balance. The balance on a reverse mortgage loan grows over time because no payments are required from the borrowers while they live in the home.  

The age-old stigma of how you can lose your home is incorrect, if the home is being maintained, and the property taxes and insurances are paid current. Upon the death of the last living borrower, the heirs have options on how to proceed. Heirs are not responsible for the repayment of the loan unless they decide to keep the home. Then a refinance can be obtained to pay off the loan balance and keep the property, or it can be sold for the remaining profit.  

Improve your retirement years with a Reverse Mortgage product that will allow you to ‘Age in Place’ and help you obtain tax-free income, allowing you to stay in your home with financial ease. It is a great idea to talk to a mortgage specialist and a trusted financial advisor about your options to ensure a quality of life during the golden years. And always remember… you can’t take it with you.