Cashflow, Dreams & the Duplex

Brian and Pam were not confident in the mortgage options presented to them. Their loan officer of many years only presented a traditional mortgage that wouldn’t help cash-flow. As they entered into a new life phase, their home financing had to evolve too. 

The Situation:

Brian and Pam moved into one of their rental units, a one-floor duplex; no stairs for the sore knees. As they looked to retiring completely, they wanted to maximize their opportunity for better cash-flow. However, they had concerns about being able to do so with a duplex and keeping the property held in their trust. After talking with several large lenders and their original loan officer, their financial advisor recommended they pursue another viewpoint ~ one more strategically aligned with retirement, from a loan team that was local and who could compare multiple options side by side.

The Financial Challenge:

While Brian and Pam have a nice nest-egg to support their retirement and rental property, they had dreams to go after. High on their wish list was a large travel budget that WOULD NOT jeopardizing their future income.

Step one, they sold their multi-level Tudor style home and moved into their one-level duplex. As mentioned before, no stairs and it was easy to ‘lock and go!” However, by occupying this unit, they no longer received the monthly rental income from it. The current mortgage balance wasn’t high, but monthly payments (without the former rental income) would eat into discretionary funds as they scaled back on their working time. Brian is also concerned that Pam will outlive him. He wants to be sure she has enough income to stay comfortably in their home.

Step two…they needed more information from a trusted source. Their financial advisor referred them to Kim Dodge Reverse Mortgage.

The Solution:

Surprised and delighted to learn that multi-family housing (1-4 units) were eligible for a Reverse Mortgage as long as one of the units was owner occupied, Brian and Pam started working through multiple scenarios with Kim.

• Reverse refinance to pay off the existing mortgage and establish the Reverse Line of Credit was the base plan.
• Cash flow improved simply by not having to make a principal or interest payment on the reverse mortgage during the life of the loan. And, they still had the rental income from the other side of the duplex!
• Kim provided amortization examples with each option.
• The line of credit and equity over time could grow if they chose to make some payments at the beginning of the loan while still working part time.
• They evaluated different potential appraised value estimates and how the final appraisal could adjust their reverse loan type decisions.
• They reviewed how long the line of credit could be used as an additional income source by itself and/or in conjunction with other assets.
• They discussed choices.

The Bonus:

This extra analysis and then the execution and closing of the FHA Reverse Mortgage by Kim’s team, gave them the confidence to move forward to go after those travel dreams without sacrificing future income and financial security. Their confidence is high that assets can now last as long as they will.

Big shout out of recognition to the financial advisor who understood how the inclusion of home equity in Brian and Pam’s overall retirement plan would give them the extra boost in cash-flow to shoot for their travel dreams without sacrificing their financial security.

What to Do Next:

If you or your clients have an outside the box challenge, give Kim a call. She’s well versed in complex or layered financial goals and how the HECM (Home Equity Conversion Mortgage) or Reverse Mortgage can be structured to make the most of opportunities. Even when your home goals are a little unique, you can be confident you will know your options after conversations with our team.