March 9, 2023

March 9, 2023

President | Loan Officer
Mike Meena
Published on March 9, 2023

March 9, 2023

Many seniors own their primary residence free and clear and are looking for extra cash flow with the inflation we have seen over the past 18 months. I was talking with clients yesterday, and they were looking to buy a property with some cash, and they are taking out a Reverse Mortgage on their house for the remaining amount. Buying an investment property will instantly give them an additional $1100.00 in net cash flow that will increase over time, add a write-off, and build equity simultaneously. Hear me out because this gets good.

Oscar and Olivia Owner own a free and clear house worth $900,000.00. They earn about $5000.00 between SSI and a pension. They have $200,000.00 in a bank account, and if they put that in a money market account, they will earn 3.00% or $500.00 per month.

They want to increase their cash flow, but if they get a mortgage on an investment property, they will break even or make less than they make now in a money market. If they get a Reverse mortgage on their Primary residence and take their liquid cash from the Reverse mortgage, they can buy an investment property free and clear. Yes, they will now have an increasing mortgage on their house, but the equity in the new property will be increasing too!

They borrow $250,000.00 and buy for $425,000.00. They will receive rent of $2500.00 per month, taxes and insurance are $550.00, Property management $150.00, and Expenses $200.00 = $900, so they net $1600.00 vs. $500.00 on the money market.

New house rent will increase by 3% annually – $2500 now = $2904 in 5 years / $3373 in 10 years / $3918 in 15 years

New house value – $425,000.00 today at 4% increase = $518,923 in 5 years / $633,600 in 10 years / $773,628 in 15 years

Mortgage Balance on Primary – $250,000.00 Today / $345,000.00 in 5 years / $478,000.00 in 10 years / $661,000.00 in 15 years. This assumes interest rates stay at these levels, and if rates go lower, then this will perform better.

Value of main house worth $900,000.00 today – $1,098,900 in 5 years / $1,341,749 in 10 years / $1,638,271 in 15 years

Your cash flow in 15 years is $1400.00 more than it is today. Yes, you eat away at some of the principal, assuming that interest rates stay at these levels, but you still have $1,750,896 in equity in 15 years. You could sell the rental anytime and pay off your Reverse Mortgage, but remember, and we are doing this for the extra cash flow.

In 5 years, the cash flow will be $1500 more than the money market. In 10 years, it is $2000 more than the money market; in 15 years, it is $2500.00 more per month. The cash flow more than makes up for the increased mortgage balance. The additional cash flow we will bring is about $360,000.00 over 15 years or $2000.00 monthly over a money market account.

Rates are still higher, although today was better than yesterday! We are still near our highest levels since February 1. Lots of economic news is coming out next week, including CPI and PPI. Let’s hope that inflation subsides and rates move lower. Don’t hold your breath, but think good thoughts.

  • 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!
  • Government Loans (FHA / VA) are in the mid to high 5’s.
  • Conventional Loans up to $726,200.00 are in the low to mid 6’s.
  • High Balance Loans $726,201.00-$ 1,089,300.00 are in the mid to high 6’s
  • Jumbo loans above $1,089,300 are in the low to mid 6’s
  • 5/1, 7/1, 10/1 Arms are in the 5’s and 6’s.
  • Bank statement loans - They are available with 10% down again! 7’s + depending on down and credit score.
  • Stated income loans – 20% down with reserves! In the 8’s and 9’s!
  • 0 down loans are in the high 5’s to low 6’s- 620 credit score min right now! Low 6’s, for the most part, up to $725,000.00.
  • Private Money lenders - hard Money Loans – 35% down!
  • No Ratio Loans 30% down
  • Debt Service Coverage loans with as little as 25% down
  • Bridge Loans - are typically 7.49% with limited fees – But they get you where you need to go!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I will be around all weekend if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text me at 661-714-6258 or email me at Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!

President | Loan Officer
Mike Meena President | Loan Officer
Click to Call or Text:
(661) 714-6258

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