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Using a Reverse Mortgage to BUY a Home?

Most of us are familiar with the concept of using a reverse mortgage to extract equity from our existing home to help pay for daily living expenses or just make life more enjoyable and comfortable.  But did you know that you may be able to use a reverse mortgage to help BUY your dream home on Cape Cod?

Consider the following example.  You and your spouse, both age 62 or over, have just sold your primary residence in Winchester.  The sale netted you $800K which you plan to use to buy your retirement home on Cape Cod.  While searching the available Cape Cod homes for sale, you spot a stunning 3500 sqft contemporary Cape in Harwich Port on a half-acre, beautifully manicured lot within walking distance to the ocean. Your Realtor believes you could probably get it for $1 million.  This is more than you had planned to spend, but you can’t get the home out of your mind.  You and your spouse discuss taking out a $200K mortgage to cover the difference, but the mortgage payments would place a greater burden on your fixed retirement income than you care to assume.  So what can you do?

Well for one thing, you could consider taking out a lump-sum reverse mortgage for the extra $200K.  With a reverse mortgage, you do not need to make payments on the loan.  It would be paid in full, along with all applicable fees and interest, from the proceeds of the home after the home is sold by you or your heirs.  The benefit to you?  You get to live your retirement years in a much nicer home than you had originally planned, without impacting your available income and quality of life in the least.  For some people, it certainly is an attractive option.

The vast majority of reverse mortgages are part of the Federal Housing Administration’s reverse mortgage program and are also called Home Equity Conversion Mortgages (HECM). They are backed by the government and made available through approved FHA lenders. But with that said, reverse mortgages aren’t for everyone, and you should fully understand all of their implications before getting one.  The government helps you do this by insisting that you meet with a HUD-approved counseling representative before being approved for one.  But for many older adults, reverse mortgages help them enjoy a more comfortable, fulfilling retirement by tapping into a portion of their home’s equity without having to make payments while they still live there.

If you are considering using a reverse mortgage to help purchase your Cape Cod dream home, you should consult with your financial advisor to be sure it is the best solution to help you achieve your objectives, and also speak with an approved HECM lender. For more information about government-backed reverse mortgages, please visit the HUD HECM for Purchase website. To search the entire Cape Cod MLS for available homes, please visit OUR website. We look forward to helping you find the retirement home of your dreams.