Platinum Lending Solutions / Case Study 05
Reverse Mortgage Case Study: Creating a Monthly Cash-Flow Strategy for a Mortgage-Free Homeowner
How a customized reverse mortgage structure addressed limited income, delinquent property taxes, and a homeowner’s need for additional monthly cash flow.
By Stacy Schlesinger | NMLS #252075
President & Mortgage Broker | Platinum Lending Solutions
At a glance
- The challenge
- Create monthly cash flow while accounting for property-tax obligations.
- The approach
- Evaluate a shorter distribution period and the required tax-and-insurance set-aside.
- The strategy
- A customized strategy addressed immediate needs and allowed for future review.
Monthly term payments end after the selected period. Borrowers must meet ongoing loan obligations. Future refinancing is not guaranteed. Individual circumstances and results vary. All financing is subject to applicable requirements and lender approval.
The Challenge
Owning a home free and clear is a significant financial accomplishment, but it doesn’t necessarily mean a homeowner has the income needed to comfortably cover everyday expenses.
That was the situation facing one homeowner who came to me exploring a reverse mortgage.
He owned his home outright but was unable to work and had very limited income. His goal was straightforward: access some of the equity in his home to provide additional monthly cash flow and improve his quality of life.
Unfortunately, several factors made a conventional reverse mortgage payment structure less effective than he had hoped.
First, he was relatively young for a reverse mortgage borrower. Because age is one of the factors used to determine how much equity can be accessed, younger borrowers generally have less available to them than older homeowners with otherwise similar circumstances.
Second, interest rates were elevated at the time, further limiting the available proceeds.
Finally, he had delinquent property taxes. Under the applicable reverse mortgage financial assessment, a Life Expectancy Set-Aside (LESA) was required to reserve a portion of the available loan proceeds for future property taxes and insurance.
Although the home had no existing mortgage balance, these combined factors substantially reduced the amount available to support monthly distributions.
A standard long-term payment structure simply wasn’t going to provide the monthly cash flow he needed.
My Approach
Rather than focusing solely on how much equity the homeowner could access, I looked at how we could structure the available funds to address his immediate needs.
The challenge wasn’t necessarily finding more equity. It was making the equity available under the loan program work more effectively for his situation.
I evaluated alternative payment structures that would concentrate the available reverse mortgage proceeds into a shorter period of monthly distributions, rather than spreading them over a much longer timeframe.
By adjusting the distribution period, we identified a structure designed to provide the level of monthly cash flow he was seeking.
Equally important, we considered what his financial situation might look like several years down the road.
His age would increase, his property-charge payment history could improve, and interest rates might eventually become more favorable.
Instead of building the strategy around a single transaction, we considered both his immediate cash-flow needs and the possibility of reassessing his financing options in approximately four to five years.
The Results
We developed a customized reverse mortgage strategy with several objectives:
- Address his immediate cash-flow needs: Structure the available proceeds into monthly distributions over a shorter, defined period.
- Account for property-tax obligations: Incorporate the required LESA into the financing analysis.
- Allow time for an improved financial history: Establish a period of ongoing property-charge compliance that could be considered in future underwriting.
- Create an opportunity for future review: Reevaluate the financing in approximately four to five years, when his age, property value, loan balance, available programs, and prevailing interest rates could produce a different result.
The shorter distribution period was intentional. It allowed us to focus the available borrowing capacity on the years when additional monthly funds were especially important to him.
Monthly disbursements under a term-based structure end when the selected payment period expires. That does not, by itself, require repayment of the reverse mortgage, provided the borrower continues to meet the loan obligations.
Any future refinancing would depend on qualification, sufficient equity, applicable program requirements, and whether the new loan would provide a meaningful financial benefit. Additional funds or improved terms cannot be guaranteed.
Why This Loan Was Different
This transaction illustrates why reverse mortgage planning requires more than calculating a homeowner’s available equity.
The home was already owned outright. There was no existing mortgage payment to eliminate.
The homeowner’s primary objective was to create additional monthly cash flow.
But his age, the interest-rate environment, and the required LESA all affected how much money could actually be distributed.
A standard payment structure didn’t accomplish his objective, so we explored a different approach.
The difference was recognizing that the duration of the monthly distributions could be adjusted to better align with his immediate financial priorities.
It was a financing strategy built around the homeowner’s needs, not simply the maximum available loan amount.
Stacy’s Insight
One of the things I appreciate about reverse mortgage financing is that there can be more than one way to structure the proceeds.
In this case, the homeowner had considerable equity but very little income. A traditional calculation didn’t produce the monthly cash flow he needed, and stopping there would have overlooked another possibility.
By looking more closely at the distribution options, we were able to identify a structure that addressed his immediate goals while allowing us to revisit the financing in the future.
The important distinction is that a future refinance is an opportunity to evaluate, not something anyone can promise.
Sometimes a financing strategy isn’t about maximizing what someone can borrow today. It’s about understanding what they need, what the program allows, and how to make an informed decision with both the present and the future in mind.
Facing a Similar Mortgage Situation?
If you own your home outright but have limited monthly income, a reverse mortgage may be worth exploring.
The amount of available equity is important, but so are your age, current interest rates, property-charge obligations, and how you want to receive the funds.
At Platinum Lending Solutions, I help homeowners throughout Oregon and Washington understand their reverse mortgage options and evaluate whether a particular structure fits their financial goals.
Explore Your Reverse Mortgage Options
Contact Stacy or call (503) 222-4663.
Reverse mortgages are subject to eligibility, financial assessment, counseling, property, and program requirements. HECM borrowers generally must be at least 62 years old. Interest and applicable charges accrue on the outstanding balance, typically reducing home equity over time. Borrowers must maintain the property as their principal residence, keep it in good condition, and meet applicable property-tax, insurance, and other property-charge obligations. A LESA may fund certain property charges under program rules. Monthly term payments end after the selected period. Future refinancing, additional proceeds, and more favorable interest rates are not guaranteed. Individual results vary. This case study is for educational purposes and is not a commitment to lend.
Platinum Lending Solutions
Platinum Lending Solutions is the registered trade name of NW Processing Group, Inc.
Company NMLS #251560 | Oregon ML-4475 | Washington WA CL-251560
Stacy Schlesinger | NMLS #252075
Equal Housing Opportunity.
