Seniors tap into equity with JUMBO reverse mortgage

Mortgage advisor: Dominique Stevens, Mayfair Mortgage Advisors.

Property type: Single-family home in Burlingame.

Loan amount: $729,000.

Interest rate: 10.490%.

Loan type: JUMBO Reverse Mortgage.

Backstory: We have been working with our clients for many years, helping them to finance rental properties and to build their wealth portfolio through real estate acquisitions. Now in their 70s, the couple have decided it’s time to slow down and enjoy more time with friends and family.

They purchased their primary residence in Burlingame in 1983, and it has appreciated astonishingly. Their dream goal was to access funds to build an accessory dwelling unit on the property for visiting friends and family and to also access funds to purchase a condo in the wine country. They decided to tap into their equity in the home via a reverse mortgage.

We provided the clients with several loan options, and with an amortization schedule for the loan programs they most liked. An amortization schedule shows the loan details on an annual basis. It displays the loan balance as it grows every year, against the annual home appreciation, and finally how much equity is left to the heirs on an annualized basis. This document allows the homeowner to make an informed decision about the program.

By utilizing the reverse mortgage we were able to pay off a small first lien, and net them significant cash back at closing.

This allowed our clients to fund the backyard ADU construction and to purchase the condo. They will not have to make any payments on the reverse mortgage for the rest of their lives, or until they sell the property, at which time they will then pay off the loan balance.

In order to proceed with the processing of the loan, the borrowers are required to review the loan documents over the telephone with a HUD Counsellor.

The borrower’s income is considered for the transaction, as reverse mortgage lenders much ensure that there is enough income to pay the property taxes, homeowner’s insurance, utilities and to maintain the property.

A reverse mortgage allows senior adults ages 55 and older to halt mortgage payments forever. The program requires that the home be maintained as the primary residence. As nontaxable income, it does not affect Medicare, Social Security or pensions. Whatever equity is left after the reverse loan is paid off remains with the borrowers or goes to the heirs tax free.