| A future trend for Southern California Boomers? For | | | | county. Proposition 90 allows property tax base |
| Boomers and Seniors living in other areas, two out of | | | | transfers with participating counties of Alameda, Los |
| three isn't bad either. | | | | Angeles, Orange, Santa Clara, San Diego, San Mateo |
| The house is big, the kids are gone, you're tired of | | | | and Ventura counties. Be sure to contact your tax |
| maintaining the yard and you and your spouse only | | | | assessor's office for current information. |
| use half of the house. Could it be time to move and | | | | Taxpayer Relief Act of 1997 changed the way real |
| at the same time increase your retirement nest egg | | | | estate capital gains taxes are calculated. The IRS |
| and cash flow? | | | | issued updates in 2003. This rule offers up to |
| The passing of HR. 3221 and the modernization of | | | | $250,000 tax free sales home profits for a single |
| FHA and reverse mortgages is a step in the right | | | | person and up to $500,000 profits for a couple. To |
| direction in helping boomers and seniors plan for their | | | | qualify the seller must have owned and occupied their |
| retirement. The improvement is yet to be measured | | | | principal residence a total of two of the five years |
| but here are some interesting thoughts. | | | | before the home sale. (Consult your tax expert for |
| Within the last couple of weeks the president signed | | | | updated advice) |
| into law HR 3221. Amongst many things, this law will | | | | Even with today's softened housing market, many |
| do is dramatically change reverse mortgages. It will:o | | | | home owners have substantial equity in their homes. |
| Increase the loan limits for reverse mortgages (limits | | | | There is an opportunity to take advantage of these |
| have yet to be defined publicly by HUD) - which | | | | gains and improve your retirement plan with multible |
| means more liquid cash for reverse mortgage | | | | opportunities. |
| recipients.o Capped origination fees - 2% of the first | | | | Here is an example: |
| $200k of the maximum claim amount, plus 1% of the | | | | Mr. & Mrs. Jones both age 70, sell their current |
| balance above $200k to a maximum origination fee | | | | home for 1 million in Los Angeles County; Original cost |
| of $6000. On average this will reduce origination fees | | | | of home: $250,000; Mr. & Mrs. Jones decide to |
| by over $1200 for Southern California reverse | | | | buy a home for $500,000 in Ventura County. Gain on |
| mortgage borrowers.o Enable to use the FHA HECM | | | | the sale: $500,000; Exclusion for couple filing jointly: |
| reverse mortgage for HOME PURCHASEo Enable the | | | | $500,000; Taxable gain: $0. Mr. and Mrs. Jones |
| FHA HECM reverse mortgage to used on co-ops, | | | | transfer their original property tax base with them, |
| amongst other improvements | | | | keeping their original property tax base. They take |
| In 1986, California voted to provide tax relief | | | | their $500,000 exemption and buy their home in |
| (Proposition 60) to homeowners older than 55 by | | | | Ventura County with a FHA HECM reverse mortgage. |
| allowing (with some restrictions) to transfer their | | | | The FHA HECM reverse mortgage allows them to |
| existing property tax base to replacement homes of | | | | either pay $300,000-$320,000 for their $500,000 |
| the same or a lesser value within the same county or | | | | home, they have no mortgage payment and they |
| a participating reciprocal county (Proposition 90). As | | | | pocket the difference tax free. Mr. and Mrs. Jones |
| the boomers begin to retire and look to trade into | | | | may also purchase their new $500,000 home with a |
| smaller, age friendly single story homes, or consider | | | | reverse mortgage and further increase their monthly |
| 55+ communities, using this proposition may become | | | | cash flow by $6-700 a month buy opting for the |
| more popular. You can use this benefit one time. | | | | tenure payment option for life. |
| There are numerous restrictions including a single | | | | All three of these opportunities will soon be available |
| person or spouse must be 55 years old when selling | | | | to many Southern California retirees. The capital gains |
| your original property. Your new property must be a | | | | exemption is available to everyone. As soon as HUD |
| principal residence with the current market value | | | | issues the green light, FHA reverse mortgages will be |
| equal or less than your original residence. Proposition | | | | available for use in home purchases for borrowers |
| 60 covers property transfers within the same | | | | 62+ years old, throughout the USA. |