We have all heard local realtors and local real estate agents talk about the multiple perks and advantages of reverse mortgages. Yes, a reverse mortgage allows you to live in your current home after retirement while bringing a regular income as well. However, if you wish to make a shift or a move to a new place then a reverse mortgage can even be used to purchase a new home.
We will tell you how you can do that in this article below. If you are an elderly citizen of the country who has retired from service then your worries regarding future income and house for your family are legit. After retirement, the monthly income becomes way less while the expenses remain the same.
Even though retired people do have the option of home equity but the cash flow significantly reduces after retirement. Then if we add medical expenses among other things, retired citizens usually become long-shot candidates for any kind of loan or financing. Under such circumstances, a reverse mortgage will help you get a new home. Stay tuned to find out.
Usually, many people overlook the benefit of using a reverse mortgage to find a new home because they are too caught up reaping off the benefits of their home equity. But let us tell you that you would be in a better place if you use this mortgage to buy a new house. Let us explain to you using an example.
A family makes the decision of putting their property such as their home on sale and shift to a new location where their living expenses can be reduced such as in a small house or an apartment that requires less maintenance. Now their current house is valued at let’s say $600,000, they will end up getting around $300,000 once the deal is signed. Other than this, the family has a saving of $100,000 in their bank.
Now they have the offer to purchase a new smaller house in a new town worth $400,000. The family now has the option to purchase this new property by hiring a top real estate agent right away without any mortgage payments however in the end they will be left with no savings and no cash.
Wouldn’t the family feel more at ease if they have access to cash as well along with a new home? Of course, they would and a reverse mortgage helps you achieve this goal. One convenient way to achieve this is simply to purchase a new home with a conventional mortgage plan but then again what if the earnings of the family are minimal, and they cannot qualify for loans.
In a worst-case scenario what if the credit history of the family is so bad that they cannot afford monthly mortgage payments. In this case, only a reverse mortgage can help them.
Taking the same example in hand. The family can purchase their new home in the new town for $400,000 by directly paying $200,000 as a down payment and then opting for a reverse mortgage through distributing the remaining payment. This way you will not have to pay any amount for the house would have a house worth $400,000 in your possession and $200,000 as cash for your other expenses.
This depends on the worth of the home you are about to purchase, the interest rate, and the exact age of the youngest person in the family who is listed as a borrower.