As seniors look for ways to make the most out of their retirement years, financial flexibility becomes crucial. One powerful tool that is gaining attention is the Home Equity Conversion Mortgage (HECM) for Purchase loan. This innovative loan allows seniors aged 62 and older to buy a new primary residence while significantly increasing their buying power.
How Does It Work?
A HECM for Purchase loan enables seniors to combine a reverse mortgage with the equity from the sale of their home (and/or other savings) to buy a new home. This strategy allows the senior who planned to pay cash for their home purchase, to buy “up” without using 100% of their available funds.
To better understand the benefits, let’s look at two examples using actual figures:
- Example 1
- Current Home Sale Proceeds: $375,000
- New Home Purchase Price: $450,000
- Age of youngest borrower: 72
- Required Investment: $288,150
- Current Home Sale Proceeds: $375,000
- Example 2
- Current Home Sale Proceeds: $375,000
- New Home Purchase Price: $550,000 (step-up of 100K)
- Age of youngest borrower: 72
- Required Investment: $350,000
- Current Home Sale Proceeds: $375,000
* Margin and Expected rate used in both examples: 2.25% / 6.50% respectively
Here, the senior buyer has more options available for investing only $61,850 more to purchase a home priced $100,000 higher. This flexibility to purchase a more expensive or lower priced home based on retirement needs using a HECM for Purchase loan program is a great option for buyers and agents to consider.
For more information or questions, please contact Michael Pankow at 916.296.7765, NMLS 220611.
