Healthcare Provider Update: For the University of California, the primary healthcare provider is Kaiser Permanente, which is part of a network that offers comprehensive medical services to faculty and staff. They participate in programs designed to provide quality health care as well as manage costs effectively. Looking ahead to 2026, healthcare costs for University of California employees are projected to rise significantly. Premiums in the Affordable Care Act (ACA) marketplace are expected to increase sharply, with some states anticipating hikes exceeding 60%. This situation may result in more than 22 million marketplace enrollees facing increases in their out-of-pocket premiums by over 75% due to the potential expiration of enhanced federal subsidies. The combination of escalating medical costs and these subsidy changes will likely strain budgets and access, prompting employees to reevaluate their healthcare options for the upcoming year. Click here to learn more
“University of California employees evaluating downsizing should view strategies like assumable mortgages not simply as real estate decisions, but as part of a coordinated retirement income and liquidity plan that weighs cash flow, long-term flexibility, and estate considerations within their broader financial picture.” – Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement.
“University of California employees approaching retirement should evaluate housing transitions such as assumable mortgages through the lens of overall retirement cash flow, liquidity, and long-term planning priorities, rather than viewing the mortgage decision in isolation.” – Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement.
In this article, we will discuss:
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How shifting mortgage rates may influence downsizing decisions for University of California employees.
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What an assumable mortgage is and how it works.
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Key financial and strategic considerations when evaluating a move in retirement.
by Neva Bradley, CFP®, Wealth Enhancement
If you’re a University of California employee and part of the Baby Boomer generation, your home may feel very different today than it did 20 years ago.
Children’s bedrooms may now serve as guest rooms. The formal dining room might only see use during the holidays. The yard may feature more maintenance than enjoyment. Even if you love the house, it may simply feel larger than you need at this stage of life.
At the same time, many younger families are living in homes that feel too small.
Mortgage rates were historically low in 2020 and 2021. In the first half of 2021, the 30-year fixed-rate mortgage averaged roughly 2.9%, with periods dipping below 3%, according to Freddie Mac. 1
More recently, average rates have been noticeably higher—something University of California employees considering a move have likely observed.
Because of this shift in the rate environment, many retirees may not have considered a strategy that could still be relevant today.
It’s called an assumable mortgage.
An Assumable Mortgage: What Is It?
Subject to program regulations and buyer approval, an assumable mortgage allows a buyer to take over a seller’s existing loan—including the original interest rate.
That means instead of applying for a brand-new mortgage at today’s higher rates, a buyer may be able to step into a prior low-rate loan, if the loan qualifies. For University of California employees planning to downsize, this can be significant.
Instead of selling your larger home, purchasing a smaller property, and taking on a new mortgage at current market rates, you may be able to sell your larger home, downsize your living space, and assume an existing lower-rate mortgage, if eligible.
That interest rate difference can meaningfully impact monthly cash flow.
Why This May Appeal to Some Retirees
For many retirees, being completely mortgage-free is not the only objective.
- They value liquidity.
- They want flexibility.
- They prefer to keep investable assets working.
Carrying a mortgage below 4%—or even below 3%—while maintaining invested capital can be a deliberate allocation decision, particularly when considering inflation and long-term return expectations. For long-tenured University of California employees with substantial home equity and retirement savings, this can become part of a broader strategy discussion.
Taking on a significantly higher-rate mortgage when a lower-rate option may exist is worth thoughtful evaluation in today’s environment.
Important Considerations
Not all mortgages are assumable. Certain government-backed loans, such as FHA and VA loans, may allow assumption with the lender's approval and adherence to program guidelines. 2,3 Conventional loans are often not assumable unless specifically stated in the original loan terms.
There are also two practical realities to understand.
1. The Equity Gap
If a home has appreciated significantly since 2021, when rates were lower, the remaining loan balance may be far lower than the current purchase price.
Home values rose sharply between 2020 and 2022, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. 4
In this case, the buyer would need to cover the price difference—typically through cash or secondary financing.
For University of California employees who have built meaningful equity in long-held homes, this may be manageable, but it requires planning.
2. The Approval Process
Mortgage lenders must approve the buyer. The process can take longer than a traditional mortgage due to documentation and underwriting requirements.
This is not typically a last-minute strategy. It should be evaluated alongside retirement income planning, liquidity needs, estate goals, and tax considerations.
Downsizing Is About More Than Square Footage
Downsizing can affect:
- Cash flow
- Portfolio sustainability
- Proximity to family
- Lifestyle flexibility
Many retirees unlock substantial equity when selling a long-held home. That equity can potentially:
- Support retirement income
- Reduce reliance on portfolio withdrawals
- Create opportunities for gifting
- Strengthen estate planning strategies
Meanwhile, the purchasing family may gain the space they need. In certain circumstances, this can be mutually beneficial.
Paying Cash vs. Keeping a Low-Rate Mortgage
Some retirees believe paying cash for a smaller property is always the best move.
However, if a lower-rate mortgage can be assumed and long-term portfolio return expectations exceed that rate, maintaining liquidity may be a rational strategic choice. For University of California employees accustomed to balancing risk, capital allocation, and long-term planning in their careers, this framework often feels familiar.
This is not about increasing leverage unnecessarily. It is about balancing long-term sustainability and personal comfort with risk.
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The Broader Housing Environment
The Federal Reserve Bank of New York has studied what’s called the “mortgage rate lock-in” effect—where homeowners with low-rate mortgages hesitate to move because prevailing rates are much higher. 5 This dynamic has contributed to reduced housing turnover in recent years.
In that context, assumable mortgages can occasionally help facilitate transactions that might otherwise be difficult under higher prevailing rates.
Is This Strategy Right for You?
Before pursuing an assumable mortgage approach, consider:
- Is the property eligible?
- How much capital is required to bridge the equity gap?
- How does keeping—or paying off—a mortgage affect your overall retirement plan?
- How does this decision align with your income and estate planning strategy?
Housing decisions should not be separated from retirement planning.
At The Retirement Group, we help University of California employees evaluate significant financial transitions—like downsizing—within the context of their broader retirement income, tax, and legacy strategies. If you are considering a move within the next one to three years and want to determine whether this approach may fit your situation, you can call The Retirement Group at (800) 900-5867 to discuss your retirement planning needs.
Sources:
1. Freddie Mac. “Refinance Trends in the First Half of 2021.” Freddie Mac Research , 29 Oct. 2021, https://www.freddiemac.com/research/insight/20211029-refinance-trends . Accessed 16 Feb. 2026.
2. U.S. Department of Housing and Urban Development. “Are FHA-Insured Mortgages Assumable?” HUD Answers , 19 Jan. 2026, https://answers.hud.gov/FHA/s/article/Are-FHAinsured-mortgages-assumable . Accessed 16 Feb. 2026.
3. U.S. Department of Veterans Affairs. VA Home Loan Guaranty Buyer’s Guide . April 2022, https://www.benefits.va.gov/homeloans/documents/docs/VA_Buyers_Guide.pdf . Accessed 16 Feb. 2026.
4. Federal Reserve Bank of St. Louis. “S&P CoreLogic Case-Shiller U.S. National Home Price Index (CSUSHPINSA).” FRED: Federal Reserve Economic Data , updated 27 Jan. 2026, https://fred.stlouisfed.org/series/CSUSHPINSA . Accessed 16 Feb. 2026.
5. Aidala, Felix, Andreas Fuster, and Paul Goldsmith-Pinkham. “Mortgage Rate Lock-In and Homeowners’ Moving Plans.” Liberty Street Economics , Federal Reserve Bank of New York, 6 May 2024, https://libertystreeteconomics.newyorkfed.org/2024/05/mortgage-rate-lock-in-and-homeowners-moving-plans/ . Accessed 16 Feb. 2026.
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Service Credit in UCRP: Service credit is essential in determining retirement eligibility and the amount of retirement benefits for University of California employees. It is based on the period of employment in an eligible position and covered compensation during that time. Employees earn service credit proportionate to their work time, and unused sick leave can convert to additional service credit upon retirement. Employees can enhance their service credit through methods like purchasing service credit for unpaid leaves or sabbatical periods(University of Californi…).
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