Reverse mortgages are a great way for seniors to obtain extra money during their retirement years without moving out or giving up their lifestyle. By using the equity in an existing home, seniors can obtain cash to pay for trips, remodel their home, or cover the cost of increased medical care.
With that being said, there is another increasingly popular way seniors are using reverse mortgages in their retirement years. Instead of staying in their existing home, many are using the benefits of reverse mortgages to finance newer homes, to downsize, upsize, move closer to their family, to buy a house that is better for aging in place, or to move into a 55+ community.
What is a Reverse Mortgage?
In its simplest terms, a reverse mortgage is a loan that is available to homeowners over the age of 62-years-old. This loan allows seniors to convert part of the equity in their homes into money they can use today while always retaining the title to their property.
The reverse mortgage loan program was designed to help retirees maintain or improve their quality of living and enjoy their golden years. Unlike traditional mortgages, in reverse mortgages, the homeowners are not required to make monthly principal and interest payments on this loan until the home is sold or vacated. Homeowners are required to pay their taxes and insurance for the life of the loan.
Understanding the Home Equity Conversion Mortgage for Purchase
In 2009, the Home Equity Conversion Mortgage for Purchase (HECM) was created by Congress to help seniors finance new homes. Before this program was created, seniors were forced to purchase a new home, pay closing costs, and then take out a reverse mortgage on that home. Doing this caused seniors to incur additional closing costs.”. The HECM for Purchase combined this into one transaction with one set of closing costs.
There are some things homeowners should know before seeking a HECM for Purchase. Unlike traditional loans or conventional HECMs, the HECM for Purchase does require an initial down payment of about half of the home’s sale price. This typically comes from the sale of an existing home or cash on hand.
This is to ensure that there is equity built up in the home prior to beginning the reverse mortgage process. Money for this may not be borrowed.
The older you are when choosing a HECM for Purchase, the more money you can get from the loan and the less you must bring at the time of closing. The benefit of using a HECM for purchase for a new home is aging in place in the right home with no monthly mortgage payment; and, in many cases, retaining cash from the sale of the previous house.
Alison Calamia: A Reverse Mortgage Specialist You Can Count On
If you are looking for a reverse mortgage or want to learn more about how it can help you get ahead in 2019, contact me, Alison Calamia.
I’m a Reverse Mortgage Specialist at America’s Mortgage Resource and a leader in the field of Reverse Mortgage Products. In fact, I was the first to bring Reverse Mortgage Products to the state of Louisiana in 1991!
For 25 years, I’ve been helping homeowners use Reverse Mortgages to get into newer, bigger, and better homes. With offices in New Orleans, Baton Rouge, and the Acadiana area, I’m just a phone call away. Please give me a call at (504) 833-2111 for more information or to get started today!