How To Purchase Your Retirement Home And Not Have A Mortgage Payment

How To Purchase Your Retirement Home And Not Have A Mortgage Payment

Recently I was introduced to a loan mortgage product that will allow a person 62 years or older to purchase a home and put down 40-62% of the purchase price and never make another mortgage payment.   This product is called a HECM (Home Equity Conversion Mortgage)  

Typically a person will pay for a home in one of 3 ways:

Option 1:  Pay with Cash

Advantages:

  • No monthly mortgage payments

  • Available equity in the event of an emergency

  • Strong negotiating power when purchasing a home

Disadvnantages:

  • Less liquidity, having a mortgage frees up cash you may have otherwise invested in the purchase of the home

  • Home could lose value and end up being worth less than you paid

  • Unable to take advantage of the tax deduction

Option 2:  Traditional Fixed Rate Mortgage

Advantages:

  • Less money upfront initially

  • Principal and interest never change, keeping your monthly mortgage payment the same each month

  • Able to take advantage of tax deductions

Disadvantages:

  • You have recurring monthly mortgage payments, which can be a burden if income suddenly changes, or you are on a fixed income

  • Home could lose value and end up being worth less than you paid

  • Your home won't be paid off for 30 years (or less)

Option 3:  HECM for Purchase

Advantages:

  • Save your monthly income each month by not making mortgage payments

  • You don't have to wait to sell your current home to use the program

  • Purchase a home without depleting your savings

  • Closing costs are included in the mortgage

  • If your home sells less than what is owed you don't have to pay the difference

Disadvantages:

  • Interest is added to loan and may increase loan faster than home value

  • Should need assets in the future to live on...your home may not be available

  • Your home may not pass to your heirs 

  • The homeowner is still responsible for HOA, paying property taxes and insurance.


While this product may not be for everyone, it is an option if you have substantial home equity in your current home and want to retire to your next home.  


Below is and example of a down payment chart based on age and purchase price.



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Jeffrey Hoover Headshot
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Phone: 704-421-8555
Dated: March 27th 2018
Views: 297
About Jeffrey: Real estate is my passion, helping you reach your dreams with an excellent customer experience is my...

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