All Cash Home Purchase Coming Up Short?
A question for real estate and financial professionals: What do retirees, and those preparing to retire, want in what could be their last home purchase?
- Single-story living
- Modern design
- Upgraded kitchen
- Outdoor living space
- Low Maintenance
- Neighborhood and nearby amenities
- Proximity to family, children and grandchildren
- Manageable or no monthly payments
The Problem:
They just sold their home, or are thinking about it, and want to purchase the next home all cash. But, all cash in this market doesn’t find a home that meets their wants and needs… Or, the market is now telling them holding on to some cash in the upcoming period of uncertainty might be a good idea.
The Solution:
There is a unique, little known loan program that was designed just for them that you should consider.
It is available for the issue middle income and affluent boomers have had in purchasing their dream home… their cash available to spend won’t meet all the requirements wanted in what could be their last home. Especially in this high interest rate environment!
It is called the Home Equity Conversion Mortgage Purchase Program, or just H4P, and has only been offered since 2009 and the Great Recession.
What makes this program different? It carries a lower interest rate than current market, requires just one payment of about 60% of the purchase price of the home (depending on the age of the borrower) and there is no monthly mortgage payment required for as long as the home is the borrower’s primary residence (where the borrower typically spends the majority of the calendar year) as well as property charges and upkeep are maintained.
How does this help? Your client could significantly improve their purchasing power compared to paying cash or taking out a regular mortgage.
And now for 2024, your clients can qualify for homes up to $1,149,000 with the FHA HECM or $4,000,000 with some excellent lender proprietary products.
How Do They Qualify?
The new H4P program is for borrowers 62 and up, are required to take independent HUD approved counseling and must undergo a financial assessment. It’s insured by the FHA, regulated by HUD and is a mortgage just like any other, except with far more protections provided through vigorous federal government oversight.
Protections and Benefits?
- The borrower still owns the property and remains on the deed. The lender merely has a lien on the property, just like a “normal” mortgage.
- The loan is easier to qualify for, in that income requirements do not include a monthly mortgage payment and credit history is reviewed as opposed to credit scores.
- There are no personal guarantees from borrower or heirs. The home is the sole collateral and neither will ever owe more than the value of the property at disposition.
- It can have a unique line of credit feature that grows in borrowing capacity at the same rate as is being charged on the outstanding loan balance.
- The line can not be called or frozen regardless of the value of the home (assuming the borrower keeps the home as their primary residence and there are no significant defaults common to all mortgages).
- While rare, the loan can grow to be in excess of the market value of the home, making it a near perfect hedge against a housing bubble blowout.
- There is no prepayment penalty, nor prohibition against making payments, on the loan. And, many borrowers voluntarily repay the loan as if it were a typical mortgage in order to increase their available line of credit dollar for dollar on repayments.
- It can become a near perfect buffer asset, freeing up liquidity reserves for better allocation with available line of credit access within 3-5 business days.
- When the time comes to sell or the last borrower no longer lives in the home… simply sell, pay off the mortgage and all remaining equity belongs to the borrower or their heirs.
It’s a mortgage just like any other, except far safer and far more flexible.
Just like that, they can buy the home they really want, without tying up a large portion of their savings or drawing down their long-term retirement portfolio.
Next step?
Simply reach out to us at Ridge Reverse and let’s discuss how we can open an entirely new source of income for realtors and a preservation/enhancement of long-term retirement assets for financial professionals. All, with a product designed specifically to help meet your client’s needs for a lifetime of happiness… while enhancing long term cashflow and quality of life.
Ridge Reverse, powered by Amerifund, provides an Equal Housing Opportunity. Information is subject to change without notice. This is not an offer for extension of credit or a commitment to secure a loan. Some restrictions may apply. This material is not from HUD or FHA and has not been approved by HUD or any government agency.Richard W. McWhorter, NMLS 1618644, is an independent reverse mortgage specialist and can assist in your reverse mortgage needs in most states. Follow him on LinkedIn, the Ridge Reverse website or contact him directly at richard.mcwhorter@amerifund.com.