Using a Reverse Mortgage to purchase a home can help a senior gain their financial freedom in retirement. Many citizens the age of 62 and older are looking to be able to purchase a home, but may not have enough money to purchase the home for cash and also can’t or does not want to have a monthly payment. This is where a Reverse Mortgage may come in to meet your financial goals.The federal government just recently started allowing the usage of the reverse mortgage to purchase a home. Which allows the buyer to increase the purchasing power, which will allow the senior to live more comfortably and preserve the cash they have in reserves. Also, this program will eliminate the monthly payment on the home. Essentially, this program was designed to lower the cost of living during retirement, but still maintain a higher standard of living you are used too.
There are two different types of reverse mortgage products you can choose from, which is the HECM Standard or the HECM Saver loan. The HECM Standard allows for more purchasing power, but comes with a bigger closing cost. You will have to determine which product best suits your financial goals.
Depending on your age, you will need to come in with a down payment of anywhere between 25% – 50% of the value of the home and then the reverse mortgage will take care of the rest of the loan. Which means with a reverse mortgage you will not have a monthly mortgage payment for as long as you live in the property.
If you were to purchase a home the traditional way and you only wanted to use $80,000 for the purchase and did not want a monthly payment, obviously the most house you could buy is a home that cost $80,000, but if you use a reverse mortgage you could increase your purchase power by over 100% and still eliminate those monthly payments.
For example, if you are 70 years old and the purchase price of the home is $200,000, you would have to put a down payment of $79,800, which could come from your retirement funds, proceeds from selling another home or even gift funds from family, and the balance of $120,200 would be taken care of by the reverse mortgage HECM Standard loan. Based on a loan amount of $120,200 with a traditional loan your payment would be $627 a month, but with a reverse mortgage you will not have that monthly payment. As you can see you can reach financial freedoms and have a comfortable standard of living without the burden of a monthly payment.
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Using a Reverse Mortgage to Purchase a Home
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Reviewed by Merlyn Rosell
Published :
Rating : 4.5
Published :
Rating : 4.5