Many homeowners wish to relocate after retirement now that they no longer need to live close to their workplace. Some wish to relocate to another geographic area or to be closer to family. Some wish to downsize, or “right-size,” to a single-story home or one with less maintenance requirements. Still, others wish to upsize to their dream home or one in an active adult, or 55+, community. Whatever the motivation, a new home might be the right choice, but relocation requires planning.
Fortunately, Movement Mortgage provides an innovative financial solution that could greatly benefit you or your clients in purchasing a new home. It is the Home Equity Conversion Mortgage for Purchase (H4P). Yes, that is a type of reverse mortgage, which means it has no required monthly principal and interest mortgage payment. Simply occupy and maintain the home and pay all other property-related charges like property taxes and insurance.
The H4P is also the only federally insured reverse mortgage, and it offers these unique advantages for homebuyers age 62 and older:
- Retain more cash: Most H4P applicants are selling one property to buy another. With the H4P, homebuyers typically only need to bring 30 to 70% of the purchase price to closing. This reduces the financial burden associated with purchasing a home in cash.
- Increase purchasing power: The H4P enables buyers to consider properties or upgrades they might have previously deemed financially out of reach.
- Increase cash flow and liquidity financing options: The H4P does not require a monthly principal and interest mortgage payment, allowing buyers to better manage their finances in retirement.
Consider a homeowner who can sell their home and net $900K in cash. They could use all their cash proceeds, purchasing a home for $900K. However, consider their options if they uses a H4P:
- They can downsize to a $700K home, investing $400K into the new home and keeping $500K for retirement savings.
- They could upsize to a $1.2M home, investing $700K into the new home and still retaining $200K for retirement.
Remember, both options have no required monthly principal and interest mortgage payment.
Please note that HECMs, whether to purchase or refinance a home, are only offered for a borrower’s “principal residence.” This means that HUD will require the borrower to occupy the home within 60 days of a purchase.
For more information, reach out to trusted Movement Mortgage lenders Jolene Messmer, Carese Busby, or Rick King.
Article was authored by Dan Hultquist of Movement Mortgage | Reserve Mortgage Communications.