Retired With No Savings but Own a House in California

Could Your Property Tax Bill Simply Be Lower?

Before borrowing anything, it helps to ask whether the house could simply cost less to keep. Property taxes are often the largest bill a paid-off home still carries.

The Consumer Financial Protection Bureau notes that state and local programs may help homeowners defer property taxes and help with utilities and home repairs. The Bureau also points homeowners to their county or town tax office for property tax programs.

In California, three programs come up most often:

• Property Tax Postponement. This is a state program run by the California State Controller's Office. To postpone a tax means to put off paying it now. A postponed amount does not disappear. It remains owed and is secured against the home, so it is repaid later. The Controller's Office publishes who is eligible, including the age, ownership, occupancy and income conditions, as well as the current income limit and the filing deadline.
• Proposition 19. This is a California voter-approved measure. Among other things, it lets older homeowners who meet its conditions carry their existing property tax base to a replacement home. A tax base is the assessed value the county uses to figure the tax. Proposition 19 also changed how property passes from parents to children for tax purposes.
• The Homeowners' Exemption. This is a reduction in assessed value for owners who live in the home.

The county assessor's office can explain each program's current amounts, conditions and application steps.

Lowering what the house costs to keep can matter as much as finding new money.

Benefits and Assistance Programs Available to California Seniors

A family often asks whether owning a house rules out help with everyday bills. Not necessarily. Each program sets its own income and asset tests, and those tests change over time. The administering agency is the place to check current eligibility.

Several programs are worth knowing about:

• CalFresh. This is California's version of SNAP, the federal food assistance program. It helps households buy groceries. The California Department of Social Services publishes the current eligibility rules, and the county social services office takes applications.
• LIHEAP. The Low Income Home Energy Assistance Program helps with heating and cooling bills. In California, local agencies deliver it. The California Department of Community Services and Development, or the county, can give the current program status.
• Medicare Savings Programs. These programs can help pay Medicare costs. Medicare.gov says that a Medicare Savings Program might also pay Part A and Part B deductibles, coinsurance and copayments for people who qualify. It also says that applications go through the state, that income limits go up each year, and that some states do not count certain income or resources.
• Medi-Cal. This is California's Medicaid program, run by the California Department of Health Care Services. Two questions are worth raising with the Department or a county Medi-Cal office. The first is how a home is treated when eligibility is decided. The second is whether the state may later seek repayment from an estate, a process called estate recovery.

The CFPB also points to benefitscheckup.org for information on benefit programs. When a parent's situation is the concern, the needs of elderly parents who own a house often start with this same benefits check.

Staying in the Home While Reaching the Equity Inside It

Lowering bills sometimes is not enough. The next question is how to draw on the home's value while staying in it. Each choice below trades cash now for some obligation later. The trade-offs among the ways to get money without selling are worth understanding before any one choice is made.

• Home equity loan. This is a one-time lump sum borrowed against the home. It is repaid in fixed monthly installments, and the home is the collateral, so missed payments can lead to foreclosure.
• Home equity line of credit (HELOC). This is a revolving credit line secured by the home. The owner draws from it as needed, up to a limit. The interest rate is typically variable, and monthly payments are required. The CFPB notes that home equity loans and lines of credit carry their own risks, usually have monthly payments, and depend on income and credit.
• Cash-out refinance. This replaces the existing mortgage with a larger one and pays the difference in cash. The result is a new monthly payment obligation.
• Reverse mortgage (HECM). A Home Equity Conversion Mortgage is a home loan for homeowners 62 and older. With this type of loan, borrowers don't make monthly mortgage payments. However, interest and fees are added to the balance each month, so the amount owed grows and the equity shrinks. The borrower must live in the home as a principal residence, pay property taxes and homeowners insurance, and keep the house in good condition. Generally, the loan is repaid when the last borrower dies, sells the home or moves out. A borrower who cannot keep up with taxes or insurance could face foreclosure.

A HECM is the only reverse mortgage insured by the federal government, and it is available only through an FHA-approved lender. HUD says the amount available depends on several factors: the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate, and the lesser of the appraised value, the HECM FHA mortgage limit or the sales price. The CFPB lists three main payout options: a line of credit, monthly payouts, or a lump sum. A lender pays these under the loan's terms, subject to the lender's approval.

Before a HECM, the borrower must receive counseling from a HUD-approved agency. The FTC describes this as an independent government-approved housing counseling agency. The FTC also says that the money is typically tax-free and won't affect Social Security or Medicare. How it bears on SSI or Medi-Cal is a question for those agencies.

The California Department of Real Estate warns seniors about reverse mortgage scams that use misleading terms or fees. Its alert points homeowners to license checks at dre.ca.gov and dfpi.ca.gov. Under California's Residential Mortgage Lending Act, businesses making or servicing residential mortgage loans in California generally need a license. Some are exempt, including banks and licensed real estate brokers.

Each of these choices asks for something in return, and understanding that trade is the heart of the decision.

Selling or Downsizing: What California Law Provides

Some families reach a harder question: would moving actually make life easier? Selling turns the equity into money the homeowner can use. It also ends the housing costs tied to that house. In exchange, the home itself is gone, and a new place to live has to be found.

Federal tax law can shelter much of the profit on a home sale. Under 26 U.S.C. § 121(a), "Gross income shall not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer's principal residence for periods aggregating 2 years or more."

The exclusion is generally capped at $250,000 of gain. The cap rises to $500,000 for a married couple filing jointly if three conditions are met: either spouse meets the ownership test, both spouses meet the use test, and neither spouse used the exclusion on another sale within the prior 2 years. The higher cap can also apply to a surviving spouse who has not remarried and sells within 2 years of the spouse's death, as long as those conditions were met just before the death. A tax professional can say how the rule fits a particular sale.

For a move to another California home, the county assessor can say whether the Proposition 19 tax-base transfer applies.

A middle path is renting out a room or an ADU (accessory dwelling unit, a small second home on the same lot). This brings in income without selling. It also makes the owner a landlord, with a landlord's legal duties.

For some families, moving is not a loss but a way to make the equity work harder in a new chapter.

Where to Turn When You Are Ready to Think This Through

After reading all of this, the natural question is where to begin. A sequence often helps more than a single answer.

A benefits check is a low-cost first step. The county social services office, along with the California Department of Social Services, can help identify programs for food, utilities and health costs. For property tax relief, the county assessor's office is the starting point, and the State Controller's Office handles postponement.

For any equity product, a conversation with a HUD-approved housing counselor can help. HUD keeps a HECM Counselor Roster and a phone line at (800) 569-4287. In the required HECM session, the counselor must explain the loan's costs, its financial implications and alternatives to it. A counselor can also review the full set of options without selling anything. For homeowners whose house is free and clear, the steps for borrowing against a paid-off house follow the same pattern.

Golden Roof Equity publishes deeper explanations of reverse mortgages, property tax relief, and how Medi-Cal relates to the home. None of these decisions has to be made this week. There is time to learn first.