Charlotte Relocation Guide

VOL2 ISS2 2018

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Page 89 of 99

THE ORIGINAL RELOCATION GUIDE — CHARLOTTE | VOLUME 2 — ISSUE 2 88 SENIOR FINANCE A Better Way to Buy Your Retirement Home For most of us who are age 62 or better, housing costs can be one of the biggest expenses throughout retirement. In 2016, the National Association of Realtors estimated that over 700,000 homes were sold to buyers over the age of 62. About 60% of those were financed with a traditional mortgage. Only a few thousand of those homes were financed with a payment optional Home Equity Conversion Mortgage (HECM) for purchase (H4P). Most people are not aware that someone over 62 can purchase a home with the Federal Housing Administration (FHA) insured reverse mortgage loan, commonly referred to as the H4P. The H4P is a mortgage with some very special features. [Most, but not all, reverse mortgages today are federally insured through the Federal Housing Administration's Home Equity Conversion Mortgage (HECM) Program. This article talks about HECM loans only.] At age 62, the H4P requires roughly a 60% down payment. For example, if you wish to purchase a $400,000 home, your estimated down payment would be $240,000*. The H4P would cover the $160,000 balance and you, the borrower, would have no mortgage payments! You must still pay taxes and insurance plus HOA dues, if applicable, and maintain the home. (For illustration purposes only. Closing costs and other settlement costs are additional.) Compare this to a couple of other options when purchasing a home. You could pay the full purchase price in cash, in which case you would have the total amount tied up in an illiquid asset (home equity). Your money would be stuck in your home until you sold the home, moved or passed away. You would not have a mortgage payment, but that is also the case with the H4P. You must still pay taxes and insurance and maintain the home. Or you could purchase the home with a conventional mortgage. You would typically pay 20% down and then finance the rest over 15 - 30 years. Your payment could be hundreds of dollars per month. Should you pre-decease your spouse, without insurance or proper planning, they may be left with the mortgage payment. So your options are: 1) finance with a traditional forward mortgage with monthly mortgage payments or; 2) pay the purchase price upfront, or; 3) finance with an H4P loan and not be required to make a monthly mortgage payment (you must still pay taxes and insurance and maintain the home). Are you age 62 or better with a substantial cash down payment and looking to purchase your dream home? If you answered "yes," you may be able to utilize a H4P that could help you increase your purchasing power on your next home. It is an option worth exploring and could possibly a better way to buy your retirement home. *The required down payment on your new home is determined on a number of factors, including your age or eligible non-borrowing spouse's age, if applicable; current interest rates; and the lesser of the home's appraised value or purchase price. ** There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrower is still responsible for paying property taxes and insurance and maintaining the home. Credit subject to age, property and some limited debt qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change. [] BY FAIRWAY INDEPENDENT MORTGAGE CORPORATION

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