Issue 42.12
These days 80% of all our clients that are new homeowners and are over 62 years of age are purchasing their homes with the FHA insured Senior HECM loan. We see the billboards and magazine articles from the larger retirement communities in St. George, SunRiver and Arizona that say, “Buy this $250,000 dollar home for $100,000 and have no mortgage payments for life.” “What kind of crazy loan or scam is that?”
The magazine articles and the radio ads are referring to the FHA insured HECM mortgage. The truth is – that the loan is simply a government FHA insured loan. Nothing crazy, but certainly an exciting loan program for seniors that since January of this year, about 80% of our senior clients, that are purchasing homes, are using the new FHA insured HECM Reverse Purchase. If you think about it 80% of all home sales to seniors is a big number, so why are senior clients opting to utilize this loan versus conventional financing or paying cash for their home?
Well, if our senior clients are comparing this loan with their other two options of either paying cash for a home in full or making mortgage payments the rest of their life by financing the home conventionally, they usually end up leaning towards the flexibility of this loan versus their other options.
In simpler terms, their thought is why would we pay cash for a $300,000 dollar home when we can pay $120,000 down, and keep $180,000 in our bank for emergencies or just added savings during our retirement. We still own the home just the same, from a cash flow standpoint, with no mortgage payments for the rest of our life. And, we are in a home that we love for the rest of our life with no mortgage payments and a lot of extra money in the bank for our retirement needs.
Likewise, why would a senior client choose to make a mortgage payment on a home at age 65 for the rest of their lives? Because, these mortgage payments might never really benefit them directly. Thus, my clients have depleted their liquid assets over their life by making mortgage payments; that they may desperately need for the ever increasing cost of living and taxes especially as we look to head into inflationary times.
Whether the Senior HECM mortgage is right for you is a big question. Consider all your options. Each situation and circumstances require careful considerations. However, as with 80% of new homeowners today, the HECM reverse mortgage should be one of your main options when looking at your overall financial strategy.
Brandon Hansen is a Senior Mortgage Banker Registered Investment Advisor Representative at
Cherry Creek Mortgage / Investment Advisors International and can be contacted at
www.seniorbankingtoday.com /435 668 2840 / 435 773 4164.