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Real Estate Secret - Purchase Reverse Mortgage for Your Dream Retirement Home

Didier Malagies • June 30, 2021


Real Estate Secret - Purchase Reverse Mortgage for Your Dream Retirement Home

 


What do you mean, the Purchase Reverse Mortgage? Yes, you can use a reverse mortgage to purchase your dream retirement home


(No way! Yes, way!)

Most people are unaware of this, but in 2009, as part of HERA (Housing Economic Recovery Act), an entirely new reverse mortgage was created specifically to assist potential homebuyers, 62 years of age and above, the HECM for Purchase.


Commonly referred to as the "Purchase Reverse Mortgage," this product allows people, entering the retirement portions of their lives, to maintain tens of thousands, and in many cases hundreds of thousands of dollars in liquidity, while still not being obligated to a monthly principal and interest payment. *

(*Real estate taxes, homeowner's insurance, and HOA fees must be paid separately)


Getting a Dream Retirement Home with a Reverse Mortgage?


So, is the Purchase Reverse Mortgage the answer to purchasing your "dream retirement home?" To answer that question factually, you would need to know exactly what a HECM for Purchase, commonly referred to as the Purchase Reverse Mortgage, truly is…

Simply put, a purchase reverse mortgage allows potential homebuyers, 62 years of age and above, to purchase their dream retirement home without the obligation of a monthly principal and interest payment for as long as at least one of the borrowers maintains the home as their primary residence. 

Unlike the traditional reverse mortgage, where the client owns a home and wishes to draw equity from it, the Purchase Reverse Mortgage furnishes the client with a single lump-sum payment upfront. (At the point of sale)

The combination of this lump sum and your investment, in other words, your down payment, allow the seller of the property to be paid in full.


What are the Results?

The combination of this lump sum and your investment, in other words, your down payment, allow the seller of the property to be paid in full.

You have purchased your dream retirement home, achieving your goal of having no monthly principal and interest payment and retain tens of thousands, if not hundreds of thousands of dollars in liquidity.

Example:

  • The Old Way - You purchase your dream retirement home for $300,000 cash

Your goal: to live in retirement free of a monthly principal and interest payment

  • The New Way

Your down payment is approximately $150,000.00*

You secure a purchase reverse mortgage for the remaining funds. ($150,000)

  • Results

You now own your dream retirement home - and you have retained $150,000.00 in liquidity to enhance the quality of your life.

*down payment is calculated based on both borrowers being 65 years old.

Actual down payment and retention of funds vary depending on the age of the youngest borrower, purchase price of the home, and interest rates at that time. Rates and terms are subject to change without notice.

Your reverse mortgage remains in effect as long as the original borrowers maintain the home as their principal residence.


The Hard Truth

So many people approaching retirement have been negatively affected by the volatile economic times in recent years. In fact, record-breaking low rates of returns on savings, CD's and annuities combined with losses taken in investment portfolios have negatively affected literally millions of seniors in this nation.

Imagine if, instead of paying cash for your retirement home, you retained 50% of the home's purchase price!

Let us use the example above.

How do you think your life would be affected if you had an "extra" $150,000.00 in cash reserves right now? And still, had no monthly principal and interest payment on your home?

  • What if it was a $400,000 home and you retained an extra $200,000.00?
  • What if it was a $500.000 home and you retained an extra $250,000.00?
  • What if it was a $600,000 home and you retained an extra $300,000.00?

I think you get the point!

Before we discuss what you possibly could do with this extra/newfound money, let us answer some basic reverse mortgage questions:


Will I Retain Ownership of My Home?

Yes, you retain title to your home during the period when you have a reverse mortgage, just the same as with a regular home mortgage. The reverse mortgage lender is merely extending a loan to the borrower. 

Because the homeowners retain the title, they remain responsible for paying property taxes, hazard insurance, and maintaining the home in reasonable condition, just as they would with a standard first mortgage or home equity loan.


Is the Interest Rate Fixed or Variable?

You can choose either a fixed or variable rate for your reverse mortgage.


When Does This Reverse Mortgage Come Due?

When none of the original borrowers remain in the home, the loan is due, or you may choose to pay off the loan early, as there is never a prepayment penalty. 

The family or heirs can sell the house or refinance the house and pay off the property's loan. So, as you can see, today's FHA-insured reverse mortgage offers protections and safeguards for seniors like never before.


Will My Current Income Affect My Ability to Secure a Purchase Reverse Mortgage?

There are income qualifications for receiving a reverse mortgage, but they are not as strenuous as those in the conventional or forward mortgage world.


Is My Credit a Factor When Securing a Purchase Reverse Mortgage?

Yes, A history of not meeting your financial obligations may adversely affect your ability to secure a reverse mortgage.


How Safe is the FHA Insured Purchase Reverse Mortgage?

They are as safe as any other government-insured loan. You or your heirs retain ALL ownership rights. You continue to own your home. It is impossible to fall behind on monthly principal and interest payments because there are none to make. 

Reverse Mortgages are "non-recourse" mortgages, which means that a debt CANNOT be passed to your heirs due to doing an FHA-insured reverse mortgage.



Options for the Extra Cash

So now that we know we can retain tens of thousands, and in most cases, hundreds of thousands of dollars in liquidity by using the purchase reverse mortgage, what are the possible options for this windfall of liquidity?

So much money, so little time!

  • You could just give these extra funds to your financial planner and ask him to invest the money in something with little to no risk that can grow over time.
  • You could purchase a single premium life insurance policy with a long-term care insurance option.
  • You could purchase traditional long-term care insurance and make monthly payments. (Afterall, you don't have a monthly mortgage payment)
  • You could purchase a MedicareSupplemental Policy if you are 65 years old or above.
  • You could utilize in-home care services if the need is immediate or arises in the future.
  • You could purchase other products or services to make the retirement portion of your life the highest quality possible!
  • You could "gift" some of these funds to your children or grandchildren, who could use the help now rather than in the future.
  • You could travel more.
  • You could buy a new Corvette! (Have you seen the new ones?)

I'm sure you can think of many other ways to enjoy this type of windfall.

(I just wanted to give you a few ideas…)

So now that we have learned what we could do with an extra couple of hundred thousand, what could we do with an extra million, or two million dollars?



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Fed cuts rates by 25 bps, signals a slower pace ahead

By Didier Malagies • December 20, 2024
Older homeowners have an overwhelming preference to age in place , but these circumstances can also come with unique challenges. Feelings of isolation and loneliness rank highly among these issues, but a recent study suggests that aging in place with a pet can make a big difference. The study, highlighted in Psychology Today , also noted that having pets in later life can come with its own set of unique challenges , according to Ann Toohey, one of the authors of the study who is based at the University of Calgary. The study followed initial interviews conducted in 2015 by examining how owning a pet impacted the lives of older people aging in place in their homes. According to the study, several takeaways emerged, including that the companionship of a pet makes a difference in their owners’ lives. While the companionship provided is understandably different from what is offered by another person, it also came with other potential social benefits for the seniors who owned pets. “As it happened, most of the people in this study were single,” the report in Psychology Today noted. “Having a dog, in particular, was a good way to get to know other people, so pets could also increase the size of participants’ social networks.” Finding pet-friendly housing can be an issue, according to the respondents. While the subjects were committed to keeping their pets, the housing challenges that pets can present made for a unique challenge. “Because people did not want to give up their pets, they sometimes had to accept housing that was less than ideal or even not safe due to other people in the home,” the report explained. Pets can also have other impacts on an older person’s mental well being, the study found, particularly if an older pet owner endured certain health-related challenges. “As people got older, they sometimes had difficult circumstances to deal with, such as serious issues with their own health,” the report said. “Caring for their pet provided meaning through these hard times, and a sense of things continuing to be the same, at least in some regards. In this way, the pet helped them to cope with the challenges.” Toohey added that while the seniors profiled in the study were generally committed to keeping their pets, the potential housing challenges that pet ownership can present for some older people seeking housing need to be addressed. There is a lot of potential for what she calls “companion animal relationships” to promote health in “many ways that are salient to aging.” These include spurring physical activity by walking a pet, companionship and potential involvement in pet-centric social activities with other pet owners. But certain challenges are also a factor, including the cost of pet supplies, a lack of affordable support if a pet owner becomes ill, and the need for veterinary care. There are also housing-related challenges, which could include “the prevalence of no pet rules to size restrictions to extra fees,” she said. In terms of housing policies tied to aging in place, these barriers could have the most impact, according to the report. “Greater availability of seniors’ housing that allows pets would be very beneficial and would make it easier for people to age in place with their pet,” the report said. “This would benefit those who aren’t seniors too, as more pet-friendly housing would help a wide range of people.”  This is on top of other well-documented challenges older people can face when trying to age in place. These include the high cost of long-term care , a need to create more walkable communities and housing supply illus trates that impact prospective homebuyers of all ages.

As seniors age in place, pets could encourage health and friendship

By Didier Malagies • December 17, 2024
Older homeowners have an overwhelming preference to age in place , but these circumstances can also come with unique challenges. Feelings of isolation and loneliness rank highly among these issues, but a recent study suggests that aging in place with a pet can make a big difference. The study, highlighted in Psychology Today , also noted that having pets in later life can come with its own set of unique challenges , according to Ann Toohey, one of the authors of the study who is based at the University of Calgary. The study followed initial interviews conducted in 2015 by examining how owning a pet impacted the lives of older people aging in place in their homes. According to the study, several takeaways emerged, including that the companionship of a pet makes a difference in their owners’ lives. While the companionship provided is understandably different from what is offered by another person, it also came with other potential social benefits for the seniors who owned pets. “As it happened, most of the people in this study were single,” the report in Psychology Today noted. “Having a dog, in particular, was a good way to get to know other people, so pets could also increase the size of participants’ social networks.” Finding pet-friendly housing can be an issue, according to the respondents. While the subjects were committed to keeping their pets, the housing challenges that pets can present made for a unique challenge. “Because people did not want to give up their pets, they sometimes had to accept housing that was less than ideal or even not safe due to other people in the home,” the report explained. Pets can also have other impacts on an older person’s mental well being, the study found, particularly if an older pet owner endured certain health-related challenges. “As people got older, they sometimes had difficult circumstances to deal with, such as serious issues with their own health,” the report said. “Caring for their pet provided meaning through these hard times, and a sense of things continuing to be the same, at least in some regards. In this way, the pet helped them to cope with the challenges.” Toohey added that while the seniors profiled in the study were generally committed to keeping their pets, the potential housing challenges that pet ownership can present for some older people seeking housing need to be addressed. There is a lot of potential for what she calls “companion animal relationships” to promote health in “many ways that are salient to aging.” These include spurring physical activity by walking a pet, companionship and potential involvement in pet-centric social activities with other pet owners. But certain challenges are also a factor, including the cost of pet supplies, a lack of affordable support if a pet owner becomes ill, and the need for veterinary care. There are also housing-related challenges, which could include “the prevalence of no pet rules to size restrictions to extra fees,” she said. In terms of housing policies tied to aging in place, these barriers could have the most impact, according to the report. “Greater availability of seniors’ housing that allows pets would be very beneficial and would make it easier for people to age in place with their pet,” the report said. “This would benefit those who aren’t seniors too, as more pet-friendly housing would help a wide range of people.”  This is on top of other well-documented challenges older people can face when trying to age in place. These include the high cost of long-term care , a need to create more walkable communities and housing supply illus trates that impact prospective homebuyers of all ages.

What is happening when the condo questionnaire is not being all checked off

By Didier Malagies • December 16, 2024
A condo questionnaire is a critical document that lenders use during the mortgage approval process for condominium purchases. It provides detailed information about the condo complex's financial health, rules, regulations, and overall condition. Problems with the condo questionnaire can create delays or complications during the closing process. Here are some common issues that might cause problems: 1. Financial Health Concerns High percentage of owner-occupancy: Many lenders require that at least 50% (or more) of the units in the complex be owner-occupied rather than rented. If a condo complex has too many renters, it could impact the lender’s willingness to approve a loan. Reserve fund issues: Lenders typically want to see that the condo association has sufficient funds in its reserve account for future maintenance and emergencies. If the reserve fund is too low or non-existent, it raises concerns about the financial stability of the association, leading to potential loan rejection. Delinquencies in condo fees: A high rate of delinquencies in the condo association fees can signal financial instability, which lenders may view as a risk. This can delay or halt the approval process. 2. Insurance Coverage Problems Lack of adequate insurance: Lenders require that the condo association carries specific types of insurance, including property insurance and liability coverage. If the condo association's insurance policy doesn’t meet the lender's criteria, the loan may be delayed or denied. Insufficient flood insurance: If the condo is in a flood zone, the association is required to have flood insurance. A deficiency in this area can cause significant issues with closing. 3. Pending or Recent Litigation Ongoing lawsuits: If the condo association is involved in a lawsuit (e.g., against contractors, residents, or local authorities), it can be a red flag for lenders. Lawsuits can create financial and legal uncertainty, so lenders may hesitate to approve a loan until the matter is resolved. History of litigation: Even if the condo association is not currently involved in litigation, a history of legal problems could still concern lenders and complicate the approval process. 4. Non-Compliance with Condominium Guidelines Failure to meet FHA/VA guidelines: Some buyers are using FHA or VA loans, which have specific guidelines regarding condo developments. If the condo does not meet these criteria (for example, not having enough unit owners, or a commercial component taking up too much space), it can prevent the buyer from securing the loan. Non-compliant rules or by-laws: If the condo association's rules or by-laws are outdated or do not comply with lender requirements (such as restrictions on renting out units), it can create issues. 5. Discrepancies or Incomplete Information Incomplete or missing information: If the condo questionnaire is not fully completed or there is missing information about the financials or maintenance issues, lenders may hold up the approval process. Incorrect or inconsistent data: Discrepancies between the information provided in the questionnaire and the condo association’s financial statements can raise red flags, requiring additional clarification or investigation. 6. Excessive Commercial Units or Mixed-Use Properties High commercial occupancy: If a condo development has a high percentage of commercial space or mixed-use properties (residential and commercial), lenders might view this as risky. Lenders prefer predominantly residential complexes since they have a lower risk profile. 7. Special Assessments Upcoming or recent special assessments: If the condo association has recently passed a special assessment (a fee charged to condo owners for unexpected repairs or improvements) or plans to do so in the near future, it can lead to concerns about the financial health of the complex and may affect the lender's decision to approve the loan. 8. Age of the Building Older buildings with deferred maintenance: Lenders might be cautious about approving loans for condos in older buildings that have not been well-maintained. They may require detailed maintenance records or a building inspection to ensure that the property is in good condition. Conclusion Issues with the condo questionnaire that could cause problems during closing typically revolve around the financial stability, legal status, and physical condition of the condo association and its property. It's important for both the buyer and the seller to address these issues early in the process by working with the condo association to provide accurate, complete, and compliant documentation to the lender. By messaging ChatGPT, you agree to our Terms and have read our Privacy Policy. Don't share sensitive info. Chats may be reviewed and used to train our models. Learn more tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
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