Housing is on Sale!
It's no secret that there is a clearance sale going on right now in the housing market. The problem is that many people - especially senior citizens - can't seem to find the cash to buy a new home. Or, if you can afford to buy a new home, how can you avoid taking a huge loss on the sale of your old home? Either way, there are special programs available for senior citizens who are age 62 or older. Specifically, the reverse mortgage for home purchases is one of the most powerful tools available today. Here's how it works:
Step #1 - You will need a down payment of approximately 35%.
Step #2 - You will never have to make a mortgage payment!
A reverse mortgage does not carry any monthly payments. All the interest that is due on the loan is simply added to the mortgage balance. For example, if you buy a $300,000 home with a $195,000 reverse mortgage, the balance on the loan will grow over time because you aren't making any payments. When your heirs inherit the property, they will need to pay off the mortgage at that time. If the balance on the mortgage exceeds the value of the home, your heirs don't lose anything because the lender covers the difference. If the balance on the mortgage is less than the value of the home, your heirs will receive the remaining home equity as part of their inheritance.
Step #3 - You don't have to sell your old home if you don't want to
Consider a situation where someone lives in a home that would sell for $300,000 today, but $400,000 in several years when the market recovers. Why would you sell the home today and take a large loss (lose $100,000)? Most people would sell their old home at a loss in order to use the cash from the sale to purchase a new home. On the other hand, using a reverse mortgage on the new home gives you the option to keep the old home as a rental, wait for the market to recover, and then sell it later on without taking a loss. In this example, you (or your heirs) would save $100,000.
Standardizing the mortgage planning process through participation with the CMPS community of experts.
Step #4 - You can pay off the reverse mortgage on the new home when you sell your old home (if you want to)
A reverse mortgage does not carry any pre-payment penalties. This means that you can pay off the mortgage any time you want, such as when you sell the old home if you decided to keep it. On the other hand, you could invest the proceeds from the sale of your old home and keep the reverse mortgage on the new home in place.
Variations of this strategy
Even if you decide to sell your old home, you could still use a reverse mortgage to purchase the new home. This would reduce the amount of cash you need from the sale of the old home in order to make the transition work. The bottom line is that the reverse mortgage for home purchases empowers seniors with more options to take advantage of the huge clearance sale going on right now in the housing market! As a Certified Mortgage Planning SpecialistTM(CMPS®), I am committed, qualified and equipped to help you evaluate your options and make smart choices. Contact me for more information!
Chris McBrearty, CMPS
Amerifirst Financial Inc.