Most people don't think about selling and moving out of their family home until it suddenly becomes an empty nest. The children have grown up and moved out, and now the house is overly quiet. It seems more challenging than ever to clean and maintain, especially the yard. In addition, many active adults entering retirement are starting to realize that they'd prefer to live in a warmer climate.
Downsizing to a new home that better fits their needs at this stage in life feels like the right decision. One creative way to help make it happen is with a reverse mortgage – more specifically, a Home Equity Conversion Mortgage (HECM) for Purchase. Here are answer s to frequently asked questions on the concept and why it might be a good idea for you:
Why would I want to buy a new home at this stage of my life?
Whether you consider yourself a senior or not, a big multi-level house with many rooms and a big yard may take more work than you are willing to handle. For most retirees, downsizing to a smaller, more manageable home is ideal. Many want homes that cater to aging in place, with one-level living, better accessibility, wider doorways, handrails for stability, and other helpful features. Today, most everyone wishes to reside in a more temperate climate. Others want to live closer to family. Whatever your reasons, a viable option is available for those who want to enjoy their golden years in a brand-new home.
Am I qualified to use a reverse mortgage loan to purchase a home?
If you are 62 or older, the answer is yes. You can use a "Home Equity Conversion Mortgage (HECM) for Purchase," which is a loan that allows only those aged 62 and older to sell their old home and purchase a new primary residence under a reverse mortgage. Note that for HECM for Purchase loans, you'll need cash available for the down payment and to pay whatever the difference is between the HECM proceeds and the sales price. In addition, you must move into the new home within 60 days after closing. Of course, you'll also still need to fulfill the typical reverse mortgage requirements, like keeping it in good shape and timely payments of your property taxes, homeowners insurance premiums, and homeowner's association fees.
What are the benefits of a HECM for Purchase?
A HECM for Purchase loan is a unique way to obtain a dream home that would have been out of the question using traditional methods. It helps seniors avoid draining all of their retirement assets to buy a new home. And it's a way for them to enjoy an improved lifestyle without diverting any fixed monthly income toward monthly mortgage payments. With a HECM for Purchase, there are none.
How Does HECM for Purchase Work?
With the HECM for Purchase reverse mortgage, the borrower provides a down payment using the sale of their previous home or other savings. The equity earned through the down payment and the new home's value is then used to calculate the reverse mortgage loan amount. Like all reverse mortgage loans, there are no monthly payments. The HECM for Purchase is a compelling option that allows people to accomplish two goals in one transaction – to obtain a reverse mortgage and to purchase a primary residence that's a better fit for their current lifestyle. And while closing costs for this strategy may be a bit higher, money is still saved since there is only one set of closing costs. You're essentially consolidating two financial transactions (buying a home and financing it with a reverse mortgage loan) into one. Also, the seller might pay some of the closing costs (depending on your state's laws), so be sure to work with a seasoned real estate agent for advice on finding the best lenders.
At what point is a HECM for Purchase due?
There are no specific dates that stipulate when a HECM for Purchase loan is due. However, certain circumstances would cause the loan to mature. The loan would be due and payable when:
- The last remaining spouse (whether a borrower or non-borrower) passes away or leaves the home for more than 12 consecutive months to live someplace else.
- The home is sold.
- The borrower fails to pay property taxes, homeowners insurance, homeowner's association fees, comply with other loan terms, or neglects basic home repairs.
If you're looking for a new home perfect for aging in place, consider living at The Enclave at Heron Ridge. These brand new homes at Harbor Club offer easy, first-floor living without sacrificing luxury. Waterford Homes in our Heron Ridge neighborhood is another great option, as they offer gorgeous ranch plans that highlight main floor living with craftsman-style beauty. One of the best features of both these neighborhoods is that landscape maintenance is included, making it ideal for those who prefer to avoid yard work as they approach their golden years.
Harbor Club is an upscale, family-owned, debt-free, Southern Living-Inspired Community located just an hour east of Atlanta. If you're interested in learning more about The Enclave at Heron Ridge or HECM for Purchase reverse mortgages, our real estate team is happy to help. Get in touch today. We look forward to delighting you with the best resort-style living, not just for a day or a week, but in an incredible home you'll enjoy all year round.