How does the REVERSE FOR PURCHASE work? (HECM for Purchase)
A. The DOWN PAYMENT combined with FUNDS from Bank = NO REQUIRED house payments
B. Borrowers are responsible for PROPERTY TAXES, INSURANCE, MAINTENANCE, HOA DUES, CONDO FEES
How is it easier to qualify for a HECM for Purchase or REVERSE mortgage compared to a traditional mortgage?
A. The house is the collateral that pays off a reverse mortgage at the end of the mortgage rather than a buyer having to qualify based on ability to pay and credit scores and debt to income ratios.
How does the HECM for Purchase help a homeowner during their retirement years?
A. The money they were originally going to use to ‘pay all cash’ for the total purchase price for their new home, is now cut down sizably. This enables the retiree to have more money in savings to LIVE ON DURING RETIREMENT, thereby, having a more enjoyable LIFESTYLE.
B. Rather than using their cash to pay off the house, (sometimes to ‘leave it to children’) instead, just pay PART OF THE TOTAL PRICE and use the left over savings to spend on enjoying their children and grandchildren. SPEND THE MONEY ON MAKING MEMORIES, instead of putting all the money in the house. The kids and grandkids would rather have fun with grandparents and have lasting memories with their loved ones.
C. The house may not even end up going to the kids/grandkids if they get stuck in a health care crisis.
How can a Reverse Mortgage or Reverse for Purchase (HECM for Purchase) help a retiree with their health care costs?
A. If the buyer does NOT pay all cash for their home, they will be able to use their savings to pay for HOME HEALTH CARE or NURSING CARE costs.
B. If a homeowner already has their house paid off, then they can extract the equity from their home and use these funds from the reverse mortgage to pay for their home health care, thereby the equity is used for the borrowers to REMAIN IN THEIR HOME, borrow the funds as needed for care, and have no obligation to make payments on their loan until the last borrower moves, sells or passes away.
Why is it important to consider the financial future of the buyers ASSETS when considering whether or not to pay all cash for a house or use the HECM for Purchase?
A. If a buyer pays the total amount of the price of the home in cash, then this limits their savings/assets that they can generate a stream of income from during their retirement. In a DOWN MARKET, it is detrimental to the longevity of their savings to pull funds from retirement accounts in a BEAR market. This goes against the RULE OF THUMB that is “buy low, sell high”… in a bear market, they can be forced to sell low and deplete their
savings accounts much more quickly than they anticipated therefore, worry about “running out of money”. A REVERSE for PURCHASE will allow for extra funds to set aside to use in a poor economy. This will allow their retirement funds to last longer and help the borrower to remain calm and enjoy a peaceful lifestyle rather than stress out because they have to make tough choices in bad situations.
B. If a husband and wife use a good portion of their savings to pay cash for their house, when one person passes away, it can make it tough for a single person to make tough choices about their finances. The surviving spouse may need to do a reverse mortgage just to have access to funds to make ends meet. Sometimes, it is better to set up the reverse mortgage, invest and save a good portion of the funds instead of paying cash for the total price of the home.
Why is it beneficial to borrowers to do a HECM for Purchase instead of a traditional mortgage.
A. If the buyer has enough funds to pay their PORTION of the DOWN PAYMENT to eliminate payments, then having NO HOUSE PAYMENT IN RETIREMENT is very important when one spouse passes away. Generally, the surviving spouse will lose at a minimum one whole social security check making it difficult to pay the mortgage and other expenses. Often times, a surviving spouse loses more than just a social security check, they can also lose pension income and have a reduced savings in the event that they had to pay for health care and home care costs prior to one’s passing away.
There are many advantages to utilizing a HECM for Purchase/Reverse Mortgage to purchase a home or to REFINANCE an existing home with a reverse mortgage. Comparing to paying cash then to turn around and do a HELOC, credit line, etc… the homeowner is still responsible for the payments on their HELOC. If a spouse passes away, the surviving spouse may not qualify for the HELOC or may not be able to afford their payments.
Starting out with the HECM for Purchase, can save a lot of time, money and heartache in the future.
What else is there as options for people that want to purchase a second home?
A. If a buyer is planning to purchase a second home, then recommending a REVERSE MORTGAGE to fund the new home has many advantages.
B. There are no payments on the new home if the funds come from the REVERSE MORTGAGE
C. There are no payments required on the primary residence when a REVERSE MORTGAGE is the funding source of the new second or vacation home.
What is another common method of purchasing a new home in conjunction with a REVERSE or HECM for Purchase?
A. Often times, a buyer will use the HECM for Purchase on a new home and RENT out their previous home.
B. Sometimes, equity is extracted from the current home, then the house is rented out to pay the payment, the cash from the current house is used to PURCHASE the new home with a HECM for Purchase. Cynthia Klimasz Real Estate-Allen Tate Realtors® in Wake Forest
RFS is a leader in the industry in the HECM for Purchase Program which is a government insured mortgage program that allows purchasing Baby Boomers to make a onetime down payment without taking on the obligation of a monthly mortgage payment.