• A Home Equity Conversion Mortgage (HECM) or Reverse Mortgage, as they are commonly known, is designed to be used by seniors at a time when they may not qualify for another type of mortgage,
• A reverse mortgage is a non-recourse loan and neither you nor your heirs will ever owe more than the home is worth,
• A  reverse mortgage can be used to purchase a new home,
• The proceeds of a reverse mortgage are tax free and if the borrower chooses to repay the loan, the interest could be tax deductible,
• According to an AARP survey, 94% of borrowers feel that a reverse mortgage has given them peace of mind.

Some Basics

The reverse mortgage has been around since the late 1980’s and is a heavily regulated industry. This product has been refined over the years and really is designed to give seniors stability in retirement. The borrower must be at least 62 years of age and use their home as their primary residence. The loan amount is based on the home’s appraised value and the age of the youngest borrower on the mortgage. Borrowers do not make mortgage payments, however, they are responsible for their annual property taxes, homeowner’s insurance payments, any HOA fees and for maintaining the home in good condition. HECM’s are backed by FHA and prior to obtaining the mortgage, borrowers will meet with a HUD approved counselor. The purpose of this counseling session is to determine how the product will best suit their needs and which of the different payment alternatives will help them reach their financial goals.

How And Why To Use a Reverse Mortgage For A New Home Purchase

f you’re 62 or older and considering purchasing a new home, using a reverse mortgage for your purchase will eliminate your mortgage payment and could put some extra cash in your pocket. The reverse mortgage will lend 45%-70% of your new home’s value. Putting together the proceeds from the previous home with the reverse mortgage loan can allow you substantial cash left over. Or if you don’t need the cash, you can buy a more expensive home, mortgage free. Just don’t forget to factor in taxes, insurance and HOA fees.

Additional Thoughts

There is far more to reverse mortgages than I can include here. HECM’s may seem like a complicated product, and you’ll want to make sure that you are comfortable with the details, just as you would with any important step in your life. Think of it this way. Just as the many “forward loan” products allow homebuyers to choose a mortgage to fit their individual needs and goals, a reverse mortgage can offer individuals over age 62 unique possibilities for their needs and goals in retirement.

Call me at 817-980-7222 to discuss a reverse mortgage for a new home purchase. Or, if you think you’d like to explore a reverse mortgage for the home you’re in now I can help you get started on that, too.