Reverse Mortgages and Home Loans in California

California is where ZYNG started, and it's still home. Our office is in Auburn, and I've been helping California homeowners with reverse mortgages since the early 2000s.

California is also one of the trickier states for a reverse mortgage. Home values are high, so the HECM lending limit comes into play more often than almost anywhere else. Property taxes work differently because of Prop 13. And the state has its own reverse mortgage rules on top of HUD's. This page walks through all of it, along with the other home loans we help Californians with.

The short version

• We help California homeowners and buyers with reverse mortgages, purchases, refinances, home equity, and VA loans.
• Reverse mortgage options include the HECM, the HECM for Purchase, and proprietary (jumbo) programs. Finance of America's HomeSafe Standard, one of the programs we compare, is approved in California.
• High home values make jumbo programs matter. If your home is worth well above the HECM limit, a jumbo may open up more money.
• California law adds a 7-day wait between counseling and a complete reverse mortgage application.
• California bars requiring an annuity as a condition of a reverse mortgage.
• Prop 13 and Prop 19 can work in your favor if you stay put or buy your next home with a HECM for Purchase.
• The state's Property Tax Postponement program isn't available with a reverse mortgage. Plan for that if you use it today.

Reverse mortgages in California

There are no required monthly mortgage payments with a reverse mortgage. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms.

Refinancing an existing HECM? In California, counseling can't be waived on a HECM to HECM refinance, even when FHA's waiver conditions are met. Plan on a counseling session. See Reverse Mortgage Refinance.

Californians use reverse mortgages to:

• Pay off an existing mortgage and stop making that monthly payment.
• Set up a line of credit for emergencies, care at home, or a rough stretch in the market.
• Add monthly income.
• Buy a home that fits the next stage of life, often a single-story home closer to family, with a HECM for Purchase.

HECM

The FHA-insured HECM is the most common reverse mortgage in California, and it comes in fixed-rate and adjustable versions. The amount you can access depends on the youngest borrower's age (or an eligible non-borrowing spouse's), current rates, and your home's value up to the national HECM limit. See Lending Limits and How a Reverse Mortgage Works.

Jumbo (proprietary) reverse mortgages

In a lot of California neighborhoods, the HECM limit is the ceiling that matters. Once your home's value is well above it, a HECM can only count value up to the limit. A proprietary jumbo program uses its own maximums, which can mean more money on a higher-value home.

As a broker, we compare jumbo programs from several lenders. Programs we compare include Mutual of Omaha Secure Equity, Finance of America HomeSafe, Longbridge Platinum, Smartfi Choice, Nationwide Equities EquityPower, and MCM Holdings MCM Edge. Availability varies by state and changes over time, so I'll tell you exactly which ones fit a California home like yours. See Proprietary (Jumbo) Reverse Mortgages.

Refinancing an existing reverse mortgage

If you took out a HECM years ago and your home has gone up a lot in value, or the limit has risen, a reverse mortgage refinance may open up more money. It has costs, so I'll only suggest it when the numbers make sense.

California's own reverse mortgage rules

California layers several consumer protections on top of HUD's. Here's what they mean for you.

The 7-day wait after counseling

Every HECM requires counseling with an independent, HUD-approved counselor before you apply. California adds a waiting period: a lender can't take a final and complete reverse mortgage application, or charge you fees, until 7 days after you complete counseling. So the earliest is the 8th day.

My advice is simple. Do counseling early, even before you've made up your mind, so the clock is already running. See Why do I need to wait 7 days after counseling? and Reverse Mortgage Counseling.

The notice and the worksheet

Before counseling, California requires the lender to give you a plain-language notice about reverse mortgages, printed in large type. You also get a reverse mortgage worksheet guide, a short self-check with questions like:

• Who lives in the home, and what happens to them after you die or move out?
• Can you keep up with insurance, property taxes, and upkeep, along with medical and living costs?
• Have you looked at less costly alternatives?
• Will any of the money be used to buy a financial product?
• Could the loan affect any government benefits?

You sign it (and so does the counselor if you meet in person), and the loan can't be approved until the signed worksheet is back with the lender. I like this rule. These are the same questions I ask at the kitchen table.

No required annuities

California law bars a lender from requiring you to buy an annuity to get a reverse mortgage, and it limits referrals for annuities, insurance, and other financial products before closing. If anyone pressures you to put reverse mortgage money into an investment, stop and call your counselor. HUD's rules point the same direction. See Reverse Mortgage Pros and Cons.

California property taxes and your reverse mortgage

Prop 13: your base-year value

Under Prop 13, your home's assessed value is generally its purchase price, and after that it usually can't rise more than 2 percent a year. If you've owned your home a long time, your property tax bill may be far below what a new buyer next door pays.

A reverse mortgage doesn't change who owns your home, so it doesn't trigger a reassessment. Your Prop 13 base stays put. That's one reason staying in place with a reverse mortgage can be cheaper than selling and buying, unless you use Prop 19.

Prop 19: taking your tax base with you at 55 and older

Prop 19 lets homeowners 55 and older sell their primary residence and carry its taxable value to a replacement home anywhere in California. The key rules:

• The original home must be sold on or after April 1, 2021.
• You can do it up to three times.
• The replacement home must be bought or built within two years of the sale.
• If the new home costs more than the old one sold for, the difference is added to your taxable value.
• You file a claim with the county assessor.

This is where a HECM for Purchase gets interesting. A homeowner can sell a large house, keep a low Prop 13 base, buy a better-fitting home with a HECM for Purchase, and end up with no required monthly mortgage payments on the new home. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. Talk to the county assessor and your tax advisor about your exact numbers. See HECM for Purchase.

Property Tax Postponement

California's Property Tax Postponement program, run by the State Controller's Office, lets some homeowners who are 62 or older, blind, or disabled postpone their property taxes. It has an income limit and requires at least 40 percent equity.

Here's the catch for reverse mortgages. You can't be in the program if you have a reverse mortgage on the home, and if a current participant takes out a reverse mortgage, the postponed taxes and interest come due. If you're using postponement today, we'll plan for paying it off at closing, and we'll compare whether the reverse mortgage still makes sense.

Insurance in California

With a HECM, you must keep homeowners insurance on the home. In parts of California, fire coverage has gotten harder to find and more expensive. Some homeowners end up with a California FAIR Plan policy for fire, plus a separate difference-in-conditions policy for the rest of their coverage. The lenders we work with accept that combination, as long as the coverage meets the lender's requirements.

If your home is in a FEMA Special Flood Hazard Area, FHA requires flood insurance too. Earthquake insurance generally isn't required for a HECM, though some people choose it.

Before we start, I'll look at your insurance with you. A reverse mortgage is only a good plan if you can keep paying the property charges for as long as you live there. That's what the financial assessment checks.

Condos and manufactured homes

A HECM on a condo generally needs FHA approval for the project or for your individual unit. Since 2019, single-unit approval has made more California condos eligible. Some jumbo programs accept condos that aren't FHA-approved.

Manufactured homes can qualify for a HECM if they meet FHA's rules, including being built on or after June 15, 1976, set on a permanent foundation, and classified as real property. See Can I do a reverse mortgage on a manufactured home that has a stick built addition?

Home loans in California

Reverse mortgages aren't all we do. We also help Californians with:

• Buying a home, with conventional, FHA, VA, and jumbo loans. See Buy a Home, Conventional Loans, FHA Loans, and Jumbo Loans.
• Refinancing to change your rate or term, or take cash out. See Refinance.
• Home equity, with HELOCs and home equity loans. See Home Equity.
• VA loans for eligible veterans, service members, and surviving spouses. See VA Loans.

For a personalized quote, see Get a Rate Quote.

California cities

We work with homeowners all over the state, by phone, video, or in person. These pages cover the cities people ask us about most:

• Fresno
• Los Angeles
• Roseville
• Sacramento
• San Diego
• San Francisco
• San Jose
• Santa Ana

Where people get tripped up

• Waiting to do counseling. With the 7-day rule, starting counseling late adds a week to everything.
• Forgetting about postponed taxes. Property Tax Postponement has to be paid off if you take a reverse mortgage.
• Assuming a HECM is the only option on a high-value home. In California, a jumbo often deserves a side-by-side look.
• Missing Prop 19 deadlines. The replacement home generally has to be bought within two years of the sale.
• Underestimating insurance. Fire and flood coverage can change the math. Get quotes early.

Common questions

Do reverse mortgages work the same way in California?

The HECM follows the same HUD rules in every state. California adds a 7-day wait after counseling, a required notice and worksheet, and limits on tying the loan to annuities or other products.

Can I get a jumbo reverse mortgage in California?

Many jumbo programs are available in California, but each lender approves states and property types on its own. I'll check the programs we compare for your home.

Will a reverse mortgage raise my property taxes?

A reverse mortgage doesn't change ownership, so it doesn't by itself trigger a Prop 13 reassessment. You still must keep paying your property taxes.

Can I use Prop 19 with a HECM for Purchase?

They're separate programs, but they can work together. Prop 19 handles the property tax side, and the HECM for Purchase handles the financing. Ask your county assessor about Prop 19 eligibility before you buy.

I'm in the Property Tax Postponement program. Can I still get a reverse mortgage?

Yes, but the postponed taxes and interest generally come due, usually paid at closing from the loan. We'll factor that into your numbers.

How long does the process take in California?

Plan on the 7-day counseling wait plus the normal appraisal, underwriting, and closing time. Doing counseling early is the easiest way to shave time.

Next step

Get your estimate, start your reverse mortgage review, or find a loan officer for California. You can also call us at 530-888-6000. For the full picture, start with Reverse Mortgages.

Sources

• California Civil Code section 1923.2: justia.com
• California Civil Code section 1923.5: findlaw.com
• California State Board of Equalization, Introduction to Prop 19: boe.ca.gov
• California State Controller's Office, Property Tax Postponement FAQ: sco.ca.gov
• HUD Mortgagee Letter 2019-17, summarized by Hinshaw & Culbertson: hinshawlaw.com
• HUD, FHA Reverse Mortgage for Seniors (HECM): hud.gov