A reverse mortgage is a type of loan that allows you to borrow money against the value of your home, without having to make monthly payments or sell your property. You can use the funds from a reverse mortgage to buy a new home, pay off debts, cover living expenses, or anything else you want. The loan is repaid when you move out, sell your home, or pass away1.
One of the benefits of a reverse mortgage is that it can help you buy a new home that suits your needs and preferences, without adding a new monthly expense to your budget. You can use the proceeds from a reverse mortgage to pay for some or all of the purchase price of a new second home, depending on the amount you qualify for and the type of reverse mortgage you choose. Remember that it is mandatory that the home that secures a reverse mortgage is your principal residence.
Perhaps your present home is too big, and the required maintenance is too much as you age. You may prefer a single level home without stairs to navigate, with less square footage to maintain. Downsizing may be the answer, but the amount of cash from the proceeds of your current property won’t fully cover the cost of the new residence. A reverse mortgage may be just the answer.
For example, if you own a home worth $1,800,000 and you owe $500,000 on that house, your proceeds from the sale after paying off the old loan and closing costs will be around $1,190,000. You identify an ideal home to downsize into for $1,400,000 but are ready to retire and no longer want to carry a monthly payment for a mortgage, nor do you want to liquidate $210,000+ from your portfolio to pay cash for the new property.Perhaps you can’t qualify for a new standard mortgage given your reduced fixed income. You can qualify for a reverse mortgage for the purchase of the new home in the amount of $486,000 and use $914,000 of sales proceeds to purchase the property. Instead of coming out of pocket with $210,000, you add to your retirement nest egg $278,000 and you have no mortgage payment moving forward.
A reverse mortgage can be a great option for retirees who want to downsize and simplify their finances, ‘right size’ their living arrangements, and be conscious of monthly cash flows. There are some things to consider before applying for a reverse mortgage. A reverse mortgage is a loan that accrues interest and may reduce the amount of equity you have in your home over time, although you do retain ownership of the home and are entitled to any appreciation that property experiences. Reverse mortgages have certain eligibility requirements, such as being at least 62 years old, living in the home as your primary residence, paying the ongoing property charges, and maintaining the property in good condition. You will also need to demonstrate your ability to financially sustain the payment of other property charges, such as property taxes, home insurance, HOA dues, and home maintenance.
If you are interested in learning more about how a reverse mortgage can help you buy a new home without increasing your monthly expenses, or expanding your purchasing power, contact me today. We are experts in reverse mortgages and can help you find the best loan program for your situation. We can also answer any questions you may have and guide you through the process step by step. Don’t miss this opportunity to expand your purchasing power and improve your quality of life with a reverse mortgage. Call me today and let me show you how we can help.
