Moving Closer to Family: A Purchase Reverse May Help

Boston MA

22 April, 2021

2:02 PM

Description

By Bonny Gilbert With more than one million people in Massachusetts now fully vaccinated, many Baby Boomers and seniors are breathing a sigh of relief. They’re planning reunions with their adult children and grandchildren, and getting excited about resuming a “new normal” over time. Those who are age 62 or older might be considering some changes as life opens up again. Perhaps the pandemic has made them realize that they want to sell their homes and move closer to other family members. Or after this difficult year, they might want the ease of condo living without worries about shoveling snow next winter. The question, though, is how they will afford to make these changes. With the price appreciation of homes—in Massachusetts and elsewhere---even moving into a smaller place may be prohibitively expensive without dipping into a 401k or other investments. But Baby Boomers and seniors can’t treat their investments as if they’re unlimited. What alternatives, then, do they have? One that they may not have considered is a “purchase reverse mortgage”—or Home Equity Conversion Mortgage (HECM) for purchase loan. These loans enable borrowers to draw more money from the sale of their home, and buy a new one (house or certain condos) without incurring monthly mortgage payments. Borrowers must be at least 62 years old and able to make a down payment of about 50 percent of the purchase price (varying according to their age, interest rates, etc.). As long as they pay their homeowner’s insurance and property taxes, and maintain their property, they don’t have to repay the loan until they move again. (If they are in the home for the rest of their lives, the balance will be deducted from its eventual sale.) Moreover, the purchase reverse will often leave them with additional cash to use for vacations, charitable giving, paying for long-term care, or meeting other needs. How does this work in practice? Here is one example. Perhaps a couple wants to move from Brookline to Natick, selling a $1.2 million home and purchasing a new one for $700,000. They take out a $350,000 purchase reverse to finance half of the purchase price of the Natick home, and fund the balance from their sale proceeds. They still have up to $850,000 left over to spend as they choose, while keeping to their original schedule of 401k withdrawals. Borrowers should talk with a reverse mortgage specialist to ensure that a purchase reverse is appropriate for their situations and goals. I wish everyone health, happiness and a new chance at fulfillment as we come through this pandemic together. Bonny Gilbert, Esq., NMLS #300106 leads the Bonny Gilbert Reverse Team with Fairway Independent Mortgage Corporation, Boston. She is licensed in Massachusetts, Connecticut, Maine, New Hampshire, New York, New Jersey, and Virginia. Contact her at [email protected] or 857-300-6775. 380 West Broadway Unit 101, South Boston, MA 02127. Click here for legal disclosures