Those who qualify for a reverse mortgage can use the product to buy a new home in retirement without a mortgage payment, advises Kiplinger in a recent article.
“The new home must be your primary residence, but if you have the cash to make a down payment equal to about half of the home’s price, you can use the proceeds from the reverse mortgage for the rest,” Kiplinger says. “And you can wait to sell your old home — or not sell it at all.”
Using the example of a couple in their 70s, Kiplinger says they were able to downsize from their 3,600-square-foot house and buy a new home closer to family by taking out a HECM.
With current interest rates, the HECM for purchase will pay for roughly half of the purchase price of the home for a 62-year-old, Shelley Giordano, of Security 1 Lending, tells Kiplinger.
“The older the homeowner and the lower the interest rate (to a point), the more you can get,” Giordano says. “You must cover the remainder from your own funds.”
Lenders will determine the maximum payout, or principal limit, for which one will qualify based on the price of the new home (the lesser of the purchase price or appraised value, up to $625,500), the ages of the applicant and spouse, and the interest rate on the loan. The new home must be the primary residence at least 183 days a year.
Read the article here.
Written by Cassandra Dowell