Syndicated financial advice columnist Benny L. Kass presented a favorable view of the Home Equity Conversion Mortgage for Purchase program in the pages of the Washington Post late last week, positioning the product as a smart option for older folks looking to leave the empty nest.
“As we grow older, we often feel the need to downsize; our kids have their own homes, and our present home is either too large, no longer to adaptable to our physical needs, or both,” Kass writes. “Or we want to be closer to our grown children and our grandchildren.”
That’s where the HECM for Purchase comes in, Kass says, laying out a quick summary of the program qualifications before listing the potential upsides: In addition to netting cash from the sale of the original home, he notes, the H4P borrower doesn’t have to worry about making mortgage payments for as long as they remain in the home.
“You can use the money you save for whatever you want,” he says.
Of course, Kass — whose skeptical take on the HECM has appeared in RMD before — cautions that the loan isn’t for everyone, warning that the principal balance grows every month and that the product might be less than ideal for those concerned about leaving the family homestead to heirs.
“But the good news is that under no circumstance will you — or your estate — have to pay the lender a deficiency between the market value of the house and the outstanding loan balance,” Kass points out. “It is insured by the FHA.”
He wisely counsels readers to consult with children and other trusted advisors before making a decision, and recommends working with certified reverse mortgage professionals after deciding on the HECM for Purchase option.
Since his piece is aimed at seniors looking to ditch their family homesteads for smaller digs, Kass devotes a good chunk of the column to the limitations on condos, explaining that the Federal Housing Administration requires condo associations to have cash reserves that equal 20% of their annual budgets to qualify for the program — with no more than 10% of delinquent units.
“Unfortunately, a large number of associations throughout the country cannot meet these requirements,” he writes. “Time will tell how this will play out under the new administration.”
Read the full column at the Washington Post.
Written by Alex Spanko