Reverse mortgages and accessory dwelling units in the same sentence? Yes. This is just another way on how to finance a grannie house.
If financing is required to build the grannie house, qualifying for the loan can be difficult depending on the situation. For a HELOC or home equity line of credit, or a cash out refinance conventional loan, income qualifying is required. When you are retired and your monthly income has dipped, it can be difficult when it comes to income qualifying.
A reverse mortgage doesn’t require a monthly mortgage payment to be included in the qualifying process making it much easier to income qualify. You can learn more about how to income qualify for a reverse mortgage by clicking on this URL How To Income Qualify For A Reverse Mortgage .
The reverse mortgage isn’t interest free, by not making a monthly reverse mortgage payment, the interest that accumulates each month that goes unpaid gets tacked on to the loan balance and gets collected once the home sells, the loan gets refinanced or the last living borrower on the loan passes away. However, you can make reverse mortgage monthly payments to pay back the borrowed money, as often as you like, and in any amount. For homeowners looking for rental income via the ADU, this comes in handy while you use the reverse mortgage funds to build the ADU and not have any rental income coming in. If you used HELOC or Conventional loan funds to build the ADU, monthly mortgage payments are required to pay those funds back which could put a crimp on cash flow.
It’s a little known fact on reverse mortgages, if you already have a low interest rate on your existing first mortgage and don’t want to refinance that rate, there’s even a second mortgage reverse mortgage where you can access funds to build the ADU and that loan as all other reverse mortgages, has a no monthly payment option to pay it back either.
The HECM reverse mortgage has a line of credit option. Where you can borrower from it as you see fit, or in increments which is perfect for home remodeling in that interest accumulates only on the portion of the credit line that you have used. The second mortgage reverse mortgage is a one-time lump sum disbursement, so all the funds start earning interest from day one.
There must be an abundance of home equity in your owner-occupied home and the minimum age is 55 as part of the qualifying for a California reverse mortgage. Not all states carry the second mortgage reverse mortgage, however the HECM reverse mortgage program is available nationwide.
I was born, raised and still live in California and only originate the California Reverse mortgage in my home state.
If you have any questions or would like to type in your scenario, you can use the form below and will get back to you ASAP.
Kind regards,
Kevin Walton
C2 Reverse
8905-276-1942