How to Trade-Up (or Down) Using a Reverese Mortgage

Mortgage and Lending with New American Funding NMLS# 613321

Home prices in many markets have gone up recently.  This is leaving many retirees with sticker

shock when it comes to trading up, or even trading down.

Consider Anna and Olaf who are in the process of selling their $400,000 home.  They’ll be left with

net proceeds of approx. $364,000 after paying 9% in sales expenses (transfer taxes, real estate

commissions, etc.).  The new house they want to purchase costs $500,000, leaving them $136,000


Option 1: sell or liquidate $136,000 worth of investments or retirement assets. They will need

to “gross up” the withdrawal for taxes if the funds are in a taxable account such as a convention-

al 401(k).  Assuming a 25% tax bracket, they will actually need to withdraw $181,333 from the

account, pay their 25% income taxes, and walk away with net proceeds of $136,000.  Ouch!

Option 2: use a $136,000 Home Equity Conversion Mortgage (HECM), also known as a

“reverse mortgage”. In this case, there would be no monthly mortgage payment.  Anna and

Olaf could preserve their retirement assets and buy their new home without any impact on their

cash flow.

Please contact me for more information or if you’d like for me to run the numbers for your situation.

John Lemos

John Lemos
NMLS Number: 613321
(951) 256-0812




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