Approaching retirement may demand a careful examination of your financial situation. Enjoying your golden years and supporting your lifestyle can mean making tough decisions regarding future priorities.

One of the most important choices faced by retired homeowners is whether or not they should remain in their current home. Freedom from employment creates new possibilities worth exploring. Whether it’s the draw of a utopian destination, a desire to be closer to family, or just a cost-saving calculation, many retirees decide that downsizing their current home is the right path.

HECM For Purchase

While most people have heard of a Home Equity Conversion Mortgage (HECM) or reverse mortgage, they may not realize the program offers options beyond accessing current equity without selling the home. A HECM for Purchase uses the proceeds from a reverse mortgage to purchase a new home.

Less Space, More Income

If the home where you raised your family is more than you need in retirement, it could make sense to downsize to something more efficient and better suited to your new lifestyle. A traditional sale of your current home and purchase of a new home is a familiar route, however, if you’re over the age of 62, a HECM for Purchase might make sense for you.

By combining the downsizing strategy with a reverse mortgage, you can use all or part of the equity you’ve accumulated toward the purchase of a more affordable house and also avoid additional mortgage payments going forward—as long as you maintain the home as your primary residence and keep property taxes, homeowners insurance & HOA dues current. You may even be able to access additional cash to supplement your retirement income along the way.

Explore Your Options

Remember, there are essential aspects of  the HECM to keep in mind. A reverse mortgage can only last as long as you live in the home. If health, or other circumstances, force you to leave the home the balance of the mortgage will become due. You or your heirs can sell the home to pay off the mortgage balance, it can be paid off with other other assets, or an heir can refinance and obtain their own mortgage. No one is responsible for repayment for any amount that exceeds the value of the home, mortgage insurance will cover the difference.

Retirement planning is critical to your financial future. If you want to discuss your options with an experienced lending partner committed to customer service, call 512-492-3300 to speak with Open Mortgage today.

Things to know about Reverse Mortgages:

  • At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
  • Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
  • The loan balance grows over time and interest is charged on the outstanding balance
  • The borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home
  • Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment

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