HECM For Purchase: Downsizing With a Reverse Mortgage
Back in 2008, Congress authorized a HECM for Purchase loan, allowing seniors, for the first time, the ability to buy a house and take out a reverse mortgage at the same time. This option still continues to be the best option for older Americans looking to downsize after they retire without breaking the bank.
Under this new program, homeowners only incur one set of closing costs, making buying a home (and getting a reverse mortgage) all the more cost-effective. As a matter of fact, the fees, terms, conditions and interest rates are identical to those in a traditional reverse mortgage.
One benefit of the HECM For Purchase Loan is the lack of monthly mortgage payments even though a homeowner has just bought a new home.
During retirement, mortgage payments can bring down a retiree’s hopes of retiring with no debt. The HECM For Purchase allows the homeowner to finance a new, smaller but less expensive home, in order to live more comfortably. A smaller home also means less maintenance so retirees can worry less about the upkeep and spend more time enjoying their retirement.
In addition, by using a reverse mortgage to purchase a new property, borrower(s) can bypass the need to apply for a forward mortgage. In addition, because retirees’ are not using all the funds from the sale of their primary residence to buy a new home, there are more funds left over to invest or use as a borrower sees fit.
In order to obtain a HECM for Purchase program, however, contact a licensed reverse mortgage professional who can calculate the amount you can potentially receive. The amount is based on the value of the property, the down payment a borrower(s) makes (50% of the home value or more) as well as their age.
If you qualify for enough money to purchase the new property, you can purchase your new home and live in the home as long as you want or until you pass away, like a traditional reverse mortgage.
Most importantly, you never have to make monthly payments for as long you are living in the property. Reverse mortgages continue to be a non-recourse loan, meaning a borrowers’ heirs are not responsible for repayment.
Also, reverse mortgage are insured by FHA and carry a mortgage insurance premium, meaning you never owe more than the current value of your home.
Be aware that while you cannot lose your home under normal circumstances, foreclosure may occur if you do not pay your taxes and insurance and otherwise comply with the loan terms.
There are many options available to you with a reverse mortgage and plenty of ways to use it during retirement. If you think a reverse mortgage program is right for you, or just have questions, give PS Financial Services a call at (888) 845-6630 or email us at info@PSReverseMortgage.com. We do not pressure those who inquire, we’re just here to help.