Issue 6.13
Well, February brings with it the St. George Parade Of Homes. We expect this year’s parade to have the same enthusiasm as we had in 2006 and 2007 when homeowners were a little more secure in choosing to purchase a home. Values in homes today are back on the rise. Likewise, the economy is back on the rise and interest rates are still at an all time low. My opinion from an investment advisor and from a senior mortgage banking perspective is that five years from now we are going to be wishing we would have taken advantage of the market in this environment. And, with the senior home purchase programs out there today, it even makes home purchasing for our senior clients certainly more attractive than it has been for many years.
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. Actually, nothing crazy, but certainly an exciting loan program for seniors that since January of last year, about 70% of our senior clients that are purchasing homes, are using the new FHA insured HECM Reverse Purchase. If you think about it, 70% 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 Senior Mortgage Banker and Registered Investment Advisor Representative for Cherry Creek Mortgage / Investment Advisors International and can be contacted at 435-668-2840 / 435 -773-4164. www.seniorbankingtoday.com