How You Can Move Into Your Retirement Dream |
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Provided by The Faust Real Estate Group at Keller Williams Capital Partners |
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Usually When you read a headline like this I run away!! I was very surprised to learn that this is not only a very legitimate program, but also a great opportunity….. It is important for you to read on if: · You or a loved one is 62 or over, or will be in the next few years! · You’re concerned you won’t have enough equity in today’s market from your current home to buy your retirement home. (So you are waiting for the market to “improve” to sell your home. · You are willing to consider an FHA sponsored program designed especially for Baby Boomers! The HECM (Home Equity Conversion Mortgage) for Purchase Program (H4P) is an FHA insured home purchase program for seniors 62+ that enables you to buy your retirement home for 30% - 50% of the purchase price and NEVER make another payment. It is sponsored by MetLIfe, a quality financial company. It’s the equivalent of a “first time homebuyer” program for seniors! How does it work? For example, John and Jane Smith are 68 years old. They need to sell their 4 bedroom suburban home for at least $275,000 to be able to buy a new condo for $250,000 cash. Their home was worth $300,000 in 2005, but will sell now for less than $270,000 and they will still need to pay sales and moving costs of an additional $30,000. Too close for comfort!! With the H4P program, they could purchase a new $250,000 condo for $99,546 down and never make another payment. This leaves them with options. They can reduce the sale price of their current house to be realistic for today’s market. Then, after closing on their new condo, they can invest the savings from their home sale, minus their new condo down payment, to generate additional future income, or set it aside for emergencies. (See more examples of how this program works at the end of this email.)
INTERESTED? Read more: "A HECM for Purchase (H4P) is a great option for older adults, because it can help them attain a house that's right for their needs without having to go through the traditional mortgage process - and their credit history and income are not a factor" says Bill Thomas, Reverse Mortgage Consultant for MetLife Bank. The H4P may be an attractive choice for those seniors looking for an alternative to traditional home financing or a way to protect liquid assets by avoiding a cash-only purchase. The key to getting the most out of this important financial option is to get all the facts to make an informed decision. HECM for Purchase: the facts · The FHA created the HECM in 2010 to enable those over 62 to purchase their next primary residence by using the purchasing power of a reverse mortgage. It could be a condo, single family home, double, or up to 4-family unit. · The loan proceeds are applied toward the home purchase. In one transaction, with a single closing, the buyer uses cash on hand to make a substantial down payment (usually 40% to 50%) that covers the property's sale price and closing costs minus the HECM proceeds. · As with any reverse mortgage, the loan must be repaid - including the principal plus accrued fees and interest - when the last surviving homeowner permanently moves out of the home or passes away. · You, the borrower, - not the bank - own the home, and can continue to live in it for as long as you want. You must continue to pay property taxes, have homeowners insurance and maintain the home. · A U.S. government guarantee ensures that you, and your estate will never owe more than your home's fair market value. If the home is sold for less than the loan balance due, the U.S. Department of Housing and Urban Development (HUD) will pay the lender the shortfall. If it sells for more than the amount due, you, or your estate keeps the net proceeds. H4C Program Features:
· No credit requirements · No employment requirements · No income requirements (some exceptions) · No debt ratios (all federal liens must be satisfied) · No monthly mortgage payments · If purchasing a condo, the complex must be FHA approved · Homeowner remains responsible for property taxes, homeowners insurance, association dues, and property maintenance · Lending amounts up to $450,000 (based on age) · LTV’s (Loan to Value ) up to 70% (based on age) · Minimum age requirement of 62.
Of course you need more information than this to make such an important financial decision. Please call me to set up a meeting with Ann Marie Harrison of MetLife to find out if this program is for you.
HECM FOR PURCHASE EXAMPLE #1
John and Jane Smith are selling the home they raised their family in to downsize and eliminate the maintenance. They are both 62 years old.
Sale Price of existing home $325,000 Less fees leaves cash of $300,000 They do not want a mortgage payment.
Purchase of new home $225,000
Cash reserves after purchase $ 75,000
Better solution: a “home equity conversion mortgage” where:
- They have no mortgage payments - Amount needed to bring to closing, only $ 96,289 - Keep liquid assets of $203,711
3 years later: They both decide they want to live out the rest of their lives in Hawaii.
Sale of home at what they purchased it for $225,000 Payoff the existing lien of -$157,000 Walk away with $ 68,000
They kept $203,711 in liquid assets working for them $229,147 (4% compounded growth) $297,147
They also saved in mortgage payments $ 36,000
HECM FOR PURCHASE EXAMPLE #2
John and Jane Smith are selling their existing home and would like to buy a beautiful home. They are both 70 years old.
Sale of existing home net gain: $120,000
They are concerned that they will not qualify for a mortgage based on their debt-to-income ratios. They also have had medical issues that have caused some problems with their credit.
Solution: Consider a “home equity conversion mortgage” where
-Purchase home they want $255,000 -Only bring to closing $ 94,474 -Income or credit will not matter -They will never have a mortgage payment -They can live in the house for the rest of their lives -Set aside for emergencies $ 25,526
HECM FOR PURCHASE EXAMPLE #3
John and Jane Smith recently moved to the area to be closer to their children/grandchildren and are looking for a place to retire. They don’t want a mortgage payment. They are both 68 years old.
Liquid assets $200,000 Want to purchase a condo for $225,000
Short to close and tying up all their money $ 25,000
Solution: Consider a “home equity conversion mortgage.”
-Purchase the condo they want $225,000 -Bring to closing from liquid assets $ 88,639 -Still preserved from their liquid assets $136,361 -Never have a monthly mortgage payment
24 years later: John and Jane Smith have lived an incredible life and enjoyed time with their children, grandkids and great grandkids. They both die and now the estate is left for the children to settle.
-Condo sells for market value $424,000 -Mortgage balance exceeds $424,000 -Payoff the portion of the lien from the sale -Walk away owing NOTHING MORE
Summary: The Smith’s paid $88,639 for a beautiful $225,000 condo and lived there for 24 years with no payments or stress.
HECM FOR PURCHASE EXAMPLE #4
John and Jane Smith are ready to buy the first “new home” they ever bought. They are both 70 years old.
They have $300,000 in liquid assets but John does not feel comfortable using all that money to purchase the home and is considering a $120,000 down payment and putting the rest in a mortgage where his payments are less than $1,000 a month. They are looking at a condo for $225,000 but Jane would like some of the beautiful options.
Solution: Consider a “home equity conversion mortgage.”
-Jane can upgrade standard $225,000 condo to $255,000 -John and Jane only have to bring $ 94,474 -John and Jane can keep liquid assets $205,526 -Never have a mortgage payment the rest of their lives
-Saved in mortgage payments over 10 years $ 87,000 -Invest $100,000 of liquid assets over 10 years At 4% compounded growth and net an additional $ 48,024
Total growth and savings $135,024
Summary: John and Jane Smith lived in a beautiful brand new $255,000 condo with all the options for $94,474; had cash reserves of $205,526 they were able to keep. By investing $100,000 over 10 years, they gained $48,024. They lived in the condo for 10 years with no monthly mortgage payment, saving $87,000 in monthly payments. |
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