Use A Reverse Mortgage To Buy A New Home

reverse mortgageA reverse mortgage loan is a great way to enjoy a more flexible retirement. As many people reach their golden years, living on a fixed income can cause stress and generally limit their options for living their life as they please. There are lots of ways to spend the funds you receive from a reverse mortgage. Many choose to spend them on unexpected medical expenses, home improvements, or even to help maintain their investment portfolios. However, you can also use a reverse mortgage to buy a new home or vacation property. In today’s blog, Family Home Loan Texas discusses how you can use a reverse mortgage to help pay for a new home. 

Reverse Mortgage Basics

A reverse mortgage, also known as a HECM, is a loan that allows you to tap into your home’s equity, turning it into liquid, spendable cash. It is available to those who are 62 and older and must be taken out on your primary residence. While anyone can apply for a reverse mortgage, it typically makes the most sense for those with at least 50% equity in their home; the more you have paid off, the more money you will likely receive. A great aspect of the loan is that the money you receive is considered non-taxable income, so you can keep everything you receive. Moreover, you do not have to pay any money back — including interest — until you stop living in the house. When you get a HECM, you can spend the money on anything you want, including a new house.

Buy A New Home With A HECM

As many people retire, they realize that their current home is too big for their current needs. They no longer have kids around, have issues with mobility, or want to pay less in taxes or on their mortgage. Of course, you can sell your current home and buy a new one, but you’ll be on the hook for a new mortgage, which can be especially frustrating if you have already paid off your previous one. Additionally, you’ll have to pay two separate closing costs, which can add up, minimizing the overall financial gain. Plus, do you want to spend your golden years keeping up with monthly mortgage payments? An alternative is to sell your current home and then get a HECM for Purchase.

How A HECM For Purchase Works

When you use a reverse mortgage to buy a new house, you will take the proceeds from selling your previous house and use that as a down payment on the mortgage — this amount can vary in cost based on several factors, including house price, your age, and more. Depending on how much you make as a down payment, your lender will calculate the reverse mortgage amount. From there, your lender will make payments to you, and you won’t have to pay anything besides property taxes, insurance, and general upkeep. 

While this may seem complicated initially, there are numerous benefits. You won’t have to make monthly mortgage payments, which frees up a lot of financial stress. Moreover, most people who purchase a new home later in life do so with the expectation that they will stay there for the remainder of their days. Because you do not have to pay anything back until you either move out of the home or pass away, you most likely won’t have to settle your loan for quite a long time. Even if you decide to move, homes have been appreciating at a fast rate, so you will probably be able to sell your home, cover what’s owed, and then have leftover money. 

Use A Reverse Mortgage For A Vacation Home

If you want to remain in your current home and purchase the vacation property of your dreams, you can also use a HECM to cover that. In this case, you will take out a reverse mortgage on your primary residence and then use the proceeds to buy a second property. This is especially viable for those who have their mortgage paid off. This may seem like a surprising way of spending your proceeds, but you are free to spend the money however you please with a reverse mortgage. If you do go this route, remember that you must still spend at least six months a year in your primary residence; not doing this is one of the few ways you can default on this loan. 

This can be an attractive option for those who have a favorite vacation spot that they frequent a lot. While you could keep paying rental prices whenever you visit, with a reverse mortgage, you will be getting paid, and you can ostensibly keep this loan for the rest of your life without having to pay anything back. Additionally, if you just want to move to this vacation spot outright, you can always do a HECM for Purchase and pay for it.

Overall, everyone has unique needs, so before you make any decisions, fully assess your finances to see if it makes sense for you. Before you begin the reverse mortgage process, you must meet with a HUD-sponsored adviser who will walk you through everything you need to know. Because of this, you will be thoroughly informed.

Contact Us To Learn More About Using A Reverse Mortgage To Pay For A New Home

Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about reverse mortgage loans, including a HECM for Purchase.