Downsizing with a Reverse Mortgage
Downsizing can be an exciting experience. It is a time to take control of your future, hone in on your top priorities and decide what is truly important to you in life. Many people plan to downsize one day and reap the benefits of their hard work through the sale of assets, and a change in lifestyle and spending habits. It is important to know how much your assets are worth, how much debt you are carrying and how much you can decrease your spending to adjust for an income shift and a more simple lifestyle. Downsizing usually starts with selling your home to purchase a smaller, easily maintainable home that is ideal for aging in. This sounds easy enough but for a lot of people, the numbers just don’t pencil out like they had hoped.
3 potential outcomes for a home purchase while downsizing:
- It is easy to overestimate the value of your property or underestimate how much it will cost to purchase a new home. Realtor fees, closing costs and those other incidentals that pop up during a home purchase can add up fast. Sometimes, the cash out of the sale of your previous home isn’t enough to purchase the new home outright. In this case, seeking out a loan to cover the difference is the usual decision. If you are able to qualify for a new home loan and afford the new monthly mortgage payments on your fixed income, then carrying a new mortgage into retirement that statistically speaking will never actually be paid off might sound like a good plan to some, as it was better than the bigger mortgage they were used to paying.
- Sometimes when people sell their home, they do net out enough cash to purchase the new home outright. This is what many Americans hope to achieve one day with their retirement. This situation is ideal if you have a robust monthly income and a large source of rainy day funds to access for any extra needs that pop up- like a new roof or heating system. When all of your cash reserves are trapped in your home equity, accessing a large sum of money when you need it may not be an option.
- Deciding on a new home can be an exciting time, but deciding on a new home loan doesn’t bring the exhilaration that picking out new curtains and carpets does. Many people don’t know you can buy a new home with a reverse mortgage and live there for life with no monthly mortgage payments. This option helps people 62 or older double their buying power, keeping more cash for themselves. Reverse mortgages have very minimal credit qualifications compared to a traditional mortgage so it may be easier to qualify for the loan. Consider what your financial picture would look like if you were able to sell your home and net out enough cash to purchase your new home outright but instead, you only spent part of the cash you have and used a reverse mortgage loan to cover the rest of the purchase price. Then, you could save your cash as your nest egg, increasing your liquid net worth and live in your forever home with no monthly mortgage payments for life. This situation is ideal for seniors 62 or older who don’t want to have the burden of a monthly mortgage payment and also desire to have a lump sum of cash to access.
To learn more about downsizing with the reverse mortgage for purchase watch our video HERE or call us anytime at 503-427-1667
Wondering how much home you can afford? Download our app to get an idea HERE or Call Jeff Foody with any questions at 503-427-1667