Are you dreaming of a new retirement home? Considering moving to a warmer climate or relocating closer to your children and/or grandchildren? Many Americans at or nearing retirement age may unknowingly have access to the funds needed to make this dream a reality. The FHA-insured reverse mortgage, or Home Equity Conversion Mortgage, could be the answer.
The FHA-insured reverse mortgage allows homeowners 62 years and older to convert a portion of their homes equity into immediate cash to use however they like. No monthly mortgage payments are required and qualifying for a reverse mortgage is much easier than conventional financing since credit score and income are not qualification factors. Current economic conditions have an ever increasing number of retired homeowners using reverse mortgages to help maintain their independence and quality of life while remaining in their home. According to the National Reverse Mortgage Lenders Association, 45,249 reverse mortgages have been endorsed during the current fiscal year, and over 618,000 since the programs inception since 1990. However, few people are aware that The Housing and Economic Recovery Act of 2008 included a HUD mortgagee letter allowing for the reverse mortgage to be used for the purchase of a new principal residence.
The Reverse for Purchase program allows seniors to purchase their new retirement home without having to pay the entire purchase price in cash, taking on monthly mortgage payments or meeting strict income and credit guidelines associated with conventional financing. When using a reverse mortgage for purchase, only the difference between the funds provided by the reverse mortgage and the value/purchase price of the home must be brought to closing. This can significantly decrease the amount of cash needed to acquire a new retirement home, allowing one to keep more cash reserves in savings, or purchase a higher priced home. This is ideal for those ready to move to their new dream home now since it is required that the new owner(s) begin their residency in the home within 60 days of closing.
Even if you are not ready to move just yet, a reverse mortgage could still be a solution to acquiring a vacation home possibly for permanent occupancy later. Since there are no restrictions on how the funds may be used, many people living in higher priced homes are able to convert enough equity in their current home to cover all or most of the cost of purchasing a second home elsewhere. So whether you are ready to pack your bags and move to your dream retirement home now, or would like a vacation home with plans of relocating later, a reverse mortgage could turn your dream into reality.