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A Home Equity Conversion Mortgage (HECM) is typically promoted as a way to remain in a long-owned home despite the income limitations that might come with retirement. However, these loans, known as reverse mortgages, can also play a role for retirees looking to change their living situation, especially in light of the dramatic increases in home values that many are experiencing.

Available to homeowners over the age of 62, a program called HECM for Purchase offers borrowers the chance to combine reverse mortgage origination with a property purchase to minimize closing costs. After selling a current home, you won’t have to choose between committing the cash to a new home or taking on a new mortgage payment. Instead, you can immediately access the equity that comes from a cash purchase or significant down payment and defer repayment for as long as it remains your primary residence.

Smaller Spaces

The benefit of this financing plan can be maximized by decisions about the type of home being purchased. A smaller, retirement-friendly home can feature a smaller price tag than larger homes that accommodate growing families.

While the viability of downsizing is dependent on the specifics of your future plans, less space can mean lower utility and maintenance costs. If the freedom of retirement has you looking forward to traveling and spending more time outside the house, combining a downsize with a HECM for Purchase can provide a significant boost to your financial flexibility in retirement.

Cheaper Places

Even if you don’t want to give up any space when transitioning from one home to another, there are other ways to cut your housing costs. Obviously, location is a predominant factor when it comes to real estate pricing. Relocating to a more affordable region can allow you to realize savings without sacrificing space.

Without the geographic restrictions of a full-time career, you can decide to prioritize proximity to family or interests or choose to focus on the lifestyle a new community offers. In any case, opting for a more affordable area may mean more space or better amenities at a lower cost than your previous neighborhood and could make your HECM for Purchase a more efficient choice.

Future Phases

Beginning retirement doesn’t mean you should stop planning for the future. If you’re making a change to your housing, be sure to consider your new home’s potential to facilitate aging-in-place.

Healthcare and long-term care are among the most costly expenses in retirement. Having a home with greater access to medical care or one that can adjust to your needs as you age is doubly important for those who opt for a reverse mortgage. Not only can proximity to providers and family reduce your healthcare costs, but the ability to stay in the home despite health challenges would also allow the HECM to continue rather than face repayment sooner than expected.

Learn more about the reverse mortgage options available to you on our website. Or call today to speak with a knowledgeable representative about any of the company’s lending programs.

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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