Mortgage Adviser: John Holmgren
Property types: Single-family homes in Berkeley
Price: Loan structure avoided tax reassessment
Loan amount: FHA HECM reverse mortgage $319,000 4.2% Conventional 30 year fixed refinance $679,650 4.125% No points
Backstory: John’s clients, father, and son, each owned single-family homes in Berkeley. The father’s home, a large family home, was larger than he needed and more than he could afford on his fixed income retirement benefit. In addition, his divorce settlement required him to make a substantial equity payment to his ex-wife. On the other hand, his son was living in a smaller home and wished to buy a larger home to accommodate his growing family, but was priced out of the competitive Berkeley market.
The clients alighted on the possible strategy of trading homes but had no idea how to make this work in a way that would work financially for both of them. The father’s financial advisor suggested that he contact John to try to come up with a solution. John suggested that they add each other to their home titles, physically switch homes, and then secure financing on their new homes.
To accommodate the situation with the father’s former home John arranged a cash-out refinance for the son to secure enough funds to pay off the father’s home loan and to pay the amount due to the father’s former spouse. To accommodate the father’s financial needs John arranged an FHA reverse mortgage on the father’s new home that paid off the son’s home loan and, since reverse mortgages require no monthly payments, solved the father’s cash flow problem.
John worked with the title company to make sure that all of this was done in such a way that neither party was subject to property tax reassessment. The result was affordable new homes for father and son!