Solano Real Estate Scene: Jim Porter
Article By: Jim Porter – May 30, 2025
The most popular reverse mortgage is the FHA insured Home Equity Conversion Mortgage for homeowners aged 62 or older.
The HECM line of credit allows a senior to set up a line of credit where they only borrow what they need and the unused portion of the line of credit grows each year. Some seniors obtain a $400,000 line of credit and start taking $3,000 per month, while others take a lump sum of $100,000 and save the growing $300,000 equity line for a rainy day.
This loan is life changing for seniors trying to live on Social Security and want to stay in their home as well as folks that have both Social Security and $400,000 in an IRA that needs to last 20 years. The HECM can be used to purchase a home too, more on this later in a future column.
The conventional reverse mortgage is the perfect solution for people that will be selling their home in a year but want money now and for folks who want more money than is available with the government backed loan.
The biggest difference between the FHA and the conventional reverse is the up-front mortgage insurance premium. This is a 2% premium based on the maximum claim amount of the HUD insured loan and the maximum claim amount is the appraised value. On a home worth $800,000, the FHA nonrefundable mortgage insurance premium would be $16,000.
A conventional reverse mortgage has no mortgage insurance, and the closing costs are the same as an FHA reverse and sometimes even less. If an 85-year-old senior wants a tax-free check for $400,000 on his $800,000 house and plans to sell the house next year, why pay the $16,000 to the Feds? Now the rate is a little higher on the conventional, but your financial adviser can do the math for you to see what makes sense.
The other reason a conventional reverse may be the preferred option is for the 92-year-old senior citizen that owns a $3.5 million home on the west side of San Mateo. This woman swims 10 laps per day down at the public pool and wants $1.5 million tax free to build a 1,000-square-foot ADU (auxiliary dwelling unit) and a $250,000 heated swimming pool in her yard, and give $100,000 to each of her five grandkids.
The HUD insured loan could only offer her a $600,000 line of credit.
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
