Reverse mortgages have become one of the primary drivers of 55+ communities over the last 3 to 5 years. In fact, Epcon Communities (one of the largest developers of 55 and over communities), stated after introducing their FHA Home Equity Conversion Mortgage for Purchase in 2013, “Now, 30% of our homebuyers utilize this buying option. After the closing, they only pay taxes, [insurance and] HOA fees…”
The reverse mortgage for purchase home financing option can make it easier and more affordable for homebuyers age 62 and older to buy a home that better fits their life. Essentially, it allows borrowers to obtain a reverse mortgage and buy a new home all within a single transaction regardless if it is an H4P or a proprietary jumbo reverse mortgage offered by lenders such as Finance of America Reverse LLC (FAR).
Here are the top 5 reasons you may want to explore this option.
1. You’re selling your old home, and are considering an all-cash purchase…
If you simply don’t want payments, 100% equity in non-liquid assets such as a home is not the only option. Consider putting half of that money in your new home and retaining the balance as part of your long-term financial plan, for traveling, for updating your otherwise perfect home for aging in place, or whatever you want. No payments needed, nor prohibited!
2. Maximize your retirement planning options…
Long-term retirement planning can be stressful without having funds available for unexpected expenses ahead of time. Having cash on-hand could be the difference between solving a major problem as it arises versus having to scramble to find a home equity line of credit, rely on family, or being forced to sell
… all, at the worst possible time.
3. Add flexibility to your retirement plan with a line of credit…
The reverse for purchase can add flexibility to your retirement plan. You can choose to borrow the maximum amount at the time of the loan to pay for your new home or you can borrow less from the home equity and leave a portion of the loan in a line of credit. For those looking to downsize, the reverse for purchase could free up more assets from the sale of the previous home, adding funds to your retirement plan.
Interest is not drawn on the line of credit unless the money is taken out. Also, money not drawn on the line of credit is guaranteed to grow at the same interest rate that is being charged on the line of credit balance outstanding. This remains true even if your home value drops.
4. Increase your purchasing power…
To buy a home with a reverse mortgage is to give homebuyers more purchasing power if they don’t want to drain all their assets. It also gives them the luxury to get a nicer homesite, or just a nicer home and add all the upgrades wanted and still have no mortgage payment.
Or, when you don’t want to “settle” for a retirement home that doesn’t match your dreams, you could use a reverse for purchase to afford a bigger, newer home with better amenities, in nicer neighborhoods within walking distance to shops and restaurants, or even the 55+ golf community you’ve always wanted.
5. You want maximum flexibility and safety for you and your heirs…
Unlike a regular mortgage or home equity line of credit, there are no personal guarantees and the loan cannot be called by the lender unless you are no longer the primary resident, default by ignoring home maintenance or not staying current on taxes, insurance or other homeowner fees. You no longer risk losing the home because the next economic downturn has caused the value of your home to decline below a typical bank’s appetite for risk.
Concerned about what happens at the end of the mortgage? It’s still your home! At termination, there are three options:
- You and/or your heirs (should they want to keep the home) will simply owe the lesser of the loan balance or 95% of the appraised value.
- Decide to sell? There are 6 months to repay the mortgage with, in most cases, two 3-month extensions available by showing the home is actively marketed.
- Or, with no personal guarantees, you can simply hand the keys to the lender and walk away with no further obligations or impact on your credit.
Finally, FHA and HUD have cleaned up the reverse mortgage industry with far more protections, independent counseling and other items designed to insure your loan and your home remains in your hands. The home belongs to you. The lender simply has a lien like any mortgage.
These 5 great reasons are just the beginning of the benefits a HECM or proprietary jumbo reverse provides. As usual, you should always consult your financial professional or a reverse mortgage specialist to determine how it may be the perfect loan for purchasing your perfect home.
Want to know more about how to buy a home with a reverse mortgage? Simply reach out to us at Central Florida Reverse Mortgage and let’s discuss how we can help you with a product designed specifically to meet your needs for a lifetime of happiness… while enhancing long term cashflow and quality of life to Simply Retire as Desired.
Richard W. McWhorter, NMLS 1618644, with McWhorter Mortgage, LLC, NMLS 1486483, dba Central Florida Reverse Mortgage is an independent reverse mortgage specialist and Certified Mortgage Planning Specialist® exclusively serving Florida (FL LO-44137) and Georgia (GA Mortgage Residential Licensee 57530). Follow him on LinkedIn, the Central Florida Reverse Mortgage website or contact him directly at Richard@CFReverse.com.
McWhorter Mortgage, LLC provides an Equal Housing Opportunity. Information is subject to change without notice. This is not an offer for extension of credit or a commitment to secure a loan. Some restrictions may apply. McWhorter Mortgage is licensed in Florida and Georgia, call for originator recommendations in other states. This material is not from HUD or FHA and has not been approved by HUD or any government agency.