Baby Boomers joyously easing into retirement who also are planning their next home purchase have an incredible investment resource available to them that will save them a great deal of cash. Unfortunately, it’s a resource most aging adults don’t know about, and some who do are skeptical to take advantage of it.
Likewise, one of our Buyers didn’t know anything about this resource, but she took advantage of it and it changed her retirement future and life.
“I’ll do all I can to help convince people,” said Carolyn Fell, a cherished client of Personal Realty Advisers. “I’ll do whatever I can, because I think it’s magical,” she said, referring to the Home Equity Conversion Mortgages (HECM). “It just is magical.”
HECMs were designed by and are insured by the U.S. Federal Government specifically to help keep seniors in their homes and enjoy their retirement. They are a great option for homebuyers and homeowners age 62 and older. It can help you hold onto your savings for your well-deserved retirement years, and/or it can help you increase your purchasing power when selecting your permanent home for retirement.
Taking Carolyn up on her offer to assist, we are sharing her story here, in hopes of educating others who might be able to take advantage of this benefit when they purchase their forever home.
One Boomer’s Retirement Home Buying Experience
Carolyn and Derek Fell were planning to retire on Sanibel Island, but Derek’s sudden death left Carolyn making that life transition on her own. In the earlier days of their planning, the Sanibel retirement plan seemed like it would be seamless, but after consolidating resources and selling properties to share with Derek’s heirs, Carolyn started to doubt her ability to enjoy retirement on Sanibel Island.
Personal Realty Advisers managed the sale of the larger home she and Derek owned in Sanibel that they often enjoyed on vacation. As avid gardening professionals, she and Derek loved the .67 acres of luscious landscape upon which they created beautiful and serene environments for relaxing.
As a single (widowed) retiree, she was not content giving up the dream of living on Sanibel Island. She consulted with Personal Realty Advisers to assist in locating a smaller house with ample space for a garden.
They quickly introduced Carolyn to a charming Florida cottage a very short distance from the beach. The property grounds were bare and unattended and offered Carolyn the opportunity to create another beautiful, dreamy oasis for her retirement days.
Although the price was reasonable, Carolyn was hesitant to assume a mortgage at her age. Personal Realty Advisers, understanding her attachment to the new property, was determined to help her realize her dream.
Work Directly With The Broker
“Rob’s the one who called me and said, ‘Hey, I want you to look into this right away,’” said Carolyn, referring to Robert Coscia the Broker and Owner of Personal Realty Advisers.
Robert knew about Home Equity Conversion Mortgages and he suspected it would be a perfect fit for Carolyn. Rob put Carolyn in touch with one of the HECM loan specialist with whom he regularly does business. They spoke with Carolyn at length over the phone to go over all the typical loan approval questions and discussions. Yes, the HECM was a great fit for Carolyn.
“It’s the best thing anyone has done for me; to be tenacious and keep pushing me and finding help for me to be able to acquire it,” said Carolyn referring to Robert’s help to acquire her Sanibel home.
With a HECM, Carolyn only needed to come up with cash for about half the sales price, and she could live in her new home with NO monthly mortgage payments. She was able to keep the remainder of her savings where she needed it to last throughout her retirement years enjoying Sanibel Island.
“To be able purchase a house under this program… I fell right into it like a rabbit going down a hole,” said Carolyn. “It was just there for me. It couldn’t have been better.”
Take Advantage of HECM
Why more people don’t take advantage of the HECM is a small mystery. Most of our buyers have never heard of it. Those who have, correlate it to other reverse mortgages that earned a bad name at one time.
“This is different,” said Carolyn. “This is a whole different approach. Because it’s a new purchase also makes a difference.”
Many mortgage brokers claim the HECM is the safest type of mortgage available, because of the level of protections built in to it. It is monitored and insured by the Federal Housing Administration (FHA).
HECMs can be used to purchase a new home or refinance. The premise of a HECM is similar to other reverse mortgages. The goal is to keep aging adults in their home long-term by utilizing the equity already established in the home or in new equity they will pay for through purchase of a new home.
The HECM for Purchase program strives for the same outcome, but this mortgage is for newly purchased homes that may be more suitable for the borrower’s retirement years. The HECM allows a homeowner to live in their home without ever having to make another mortgage payment.
“Not to have a mortgage payment, is icing on the cake,” said Carolyn. “I don’t have to worry about it.”
There are several options down the road for HECM homeowners. Homeowners can remain in their home mortgage-free until they die, until they sell the home, or until they turn 150 years old. When a homeowner dies, it gets passed on to heirs like any other home with a mortgage. Heirs determine how to handle the property and the mortgage: keep it and pay off the mortgage; or sell it, pay back the mortgage and keep any remaining profits.
There likely will be profits. The 50% of the home paid upfront for the home continues to build equity over time, earning profit for a seller. The rising property values offset the growing interest and loan balance.
In some instances, the opposite could occur: if property values are stagnant or drop, the loan balance could start to eat into some of the home’s equity. This is one of a few cons to be aware of. Most of the cons are a matter of perspective, but like other mortgages, there are some factors to be aware when you take on a HECM.
The homeowner must pay the usual fees and expenses that any borrower has to pay, such as homeowner’s insurance, taxes, maintenance, HOA fees, etc., but these need to be paid directly by the borrower, and they must be paid on time.
The HECM home must continue to be your primary home, so if you experience some life changes that require you to live elsewhere for more than half of the year, you could be at risk of needing to adjust your HECM arrangement.
The closing fees also can be a little higher than some other mortgages, but like other mortgages, these can be written into the loan balance or you can shop around to find lower fees.
All in all, most of the cons are similar to considerations for other mortgages.
Consult a HECM Expert
No mortgage process is stress-free, and HECMs are no different, but working with a qualified HECM loan manager is essential to get all the information you need to make the most informed decision for your future with the least amount of stress.
In Carolyn’s case, right at the beginning of COVID, the HECM mortgage team was incredibly helpful. A specialist visited Carolyn at her home to do all the closing paperwork for her new mortgage.
“That day probably was the most startling for me,” said Carolyn, “…at how easy it was. I don’t know why more people don’t do it.”
To start your journey into HECM education, we always recommend you go directly to the source: Housing and Urban Development (HUD), HECM for Seniors. You also can contact us at Personal Realty Advisers for referrals to several trusted HECM mortgage specialists.
Enjoy Retirement Life
Carolyn’s new life on Sanibel Island is everything she hoped it would be. “I’m very, very happy here.”
Carolyn’s health also is getting better, which is one of the reasons she wanted to be in Sanibel. “I knew the air and the water would be beneficial,” said Carolyn. “And it’s really proven to be a magnificent adventure.”
“There’s something magical about it,” she said. “I can’t thank Rob enough for this and for sticking with me.”
When you are ready to right-size your primary residence, contact us / Personal Realty Advisers directly, and we will help connect you with a HECM mortgage specialist. We will work closely with them and you to make sure the HECM is a good fit for you to purchase your next home.
Contact us at 727-317-SOLD (7653) or email at info@PRAFlorida.com. We look forward to helping you achieve your next stage of life dreams.
Leave a Reply