Reverse mortgages allow seniors (62 and older) to stay in their homes without any mortgage payments by borrowing against the equity of their homes without a requirement to pay it back until the borrower dies or the house is sold.
For some seniors, this is a welcome solution as they have no intention or need to move, and it frees them from a mortgage payment allowing them to have a greater quality of life with their fixed income. For others, the ideal solution would be to sell and move closer to family or purchase a smaller home, or yet one that would fit their physical needs best. Unfortunately, the option is not available to some of these seniors as their fixed monthly income would not be sufficient to pay for the new house’s mortgage payments.
The ability to purchase a new home using the proceeds of the sale of the existing home and financing the balance with a Reverse Mortgage allows them to live in the new home free of monthly mortgage payments.
This type of loan product is called HECM - Home Equity Conversion Mortgage and in 2008 the loan evolved to include a new variation that allowed senior homeowners the option of purchasing a new home as well.
The HECM for Purchase allows a senior to move to another principal residence that best fit their needs and to obtain a reverse mortgage. The buyer’s down payment will be from the sale of the 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. All or part of the reverse mortgage funds then covers the remaining cost of the home, just like with a traditional mortgage.
The benefit to financing with a reverse mortgage is that instead of paying the loan back every month over time like a traditional mortgage, reverse mortgage repayment is deferred to when the loan matures This way, senior borrowers on a fixed income can finance the purchase of a new home without the burden of having to make monthly mortgage payments. Borrowers are responsible for paying property taxes, homeowner’s insurance, and for home maintenance.
For more details on this loan program and to learn how it could benefit you, consult with a local lender that has vast experience with Reverse Mortgages. Feel free to reach me at any time for more details and to discuss the options available to you.
Thinking about buying or selling a home? Contact me at any time. I am never too busy for you
Mariness Chata / Mariness Chata & Associates / (661)317-3332 / Marinesschata@outlook.com