…did you know?
By: Jennifer Engelsen, Reverse Mortgage Specialist, American Liberty Mortgage, inc.
You can use a reverse mortgage for purchase?
Why yes! You may see advertisements for H4P (HECM for Purchase). Retirees are now living longer. When thinking about retirement there are many financial considerations. What are my monthly expenses? What will my fixed income be and how long will that last? How do I maximize the money I have saved to ensure I do not outlive my resources? How do I want to enjoy my retirement? What kind of home do I want to spend it in? If you are relocating, downsizing or simply looking for a change meeting your quality of life goals, reverse for purchase may be for you.
Let’s take a minute and look at the basics of how this works. It takes the value (in this case purchase price or appraised value, whichever is lower) of the home and the age of the youngest borrower to calculate the estimated “principal limit” or allowable loan amount. Your required down payment will depend on that calculation. The initial investment will be more than traditional loan standards because this is a mortgage that *increases rather than decreases over time so more room must be made for an equity reserve.
Why would that benefit me?!
Well, ponder this: You will never need to make another mortgage payment as long as either you or your spouse lives in the home as your primary residence. Then you reduce the risk of using your additional liquid assets for such purposes allowing longer retention of those funds. You still retain ownership of the home. That still means you are responsible for paying property taxes, homeowners insurance and maintenance of the home, but simply put, you are freed from monthly loan payment responsibility after the initial investment. That can go a long way looking at your financial future! On top of that, you may have more purchasing power..
Isn’t it worth exploring the HECM for purchase if you can buy an even better home to live out your retirement dreams in?