San Francisco Chronicle - (Sunday)
Reverse mortgage helps homeowners build ADU
Mortgage advisor: Dominique Stevens, Mayfair Mortgage Advisors.
Property type: Single-family home in Albany.
Loan amount: $550,000.
Interest rate: 8.99%
Loan type: JUMBO reverse mortgage.
Backstory: In September 2021, Gov. Gavin Newsom signed into law SB-9, creating a process allowing property owners to contain up to four dwellings on what were once single-family lots. Gov. Newsom essentially changed single-family zoning law throughout the state of California.
In the year-and-a-half since its inception, SB-9 has not been utilized broadly to transform the property landscape. However, I believe that this single initiative is going to be one of the most transformative land use measures in California modern history, and be one of Newsom’s resounding legacies.
Additionally, many California counties are adopting “fasttrack” ADU (accessory dwelling unit) procedures, allowing homeowners to quickly and
“In the year-and-a-half since its inception, SB-9 has not been utilized broadly to transform the property landscape. However, I believe that this single initiative is going to be one of the most transformative land use measures in California modern history, and be one of Newsom’s resounding legacies.“
easily build stand-alone living units on their lots, or adapt the current property to accommodate separate dwelling unit(s) within the existing structure. All these measures are to help ease the current housing crisis and meet the needs of a growing, changing and aging population.
Our client reached out to us for our advice on how to adapt their dwelling so that they can remain comfortably in place in retirement and into their old age, and add additional income to their healthy investment portfolio and pensions. We achieved substantial goals for our client. We were able to pay off their paltry mortgage of $245,000 with a reverse mortgage and net them approximately $300,000 in order to build a standalone ADU.
The clients will have no mortgage payments for the rest of their lives. The ADU will give them $2,500 per month in rental income. They have two pensions plus their investment portfolios. They will be more than comfortable for the remainder of their lives. We provided them an amortization schedule to show that they should have ample equity to leave their heirs, another important consideration.
The reverse mortgage is available to homeowners 55 and older. They must maintain the property as their primary residence, and keep up with property taxes and homeowners insurance. Proceeds from the loan are not considered income; therefore, they are non-taxable. The proceeds from the loan do not affect the borrowers’ qualification for social security or other benefits.