Purchase Case Scenario

How Does HECM 4 Purchase work?

A Reverse Mortgage Purchase works just like a Reverse Mortgage Refinance.  Generally requires 50% equity in the property. In the case of a purchase the down-payment equals instant equity.

The remaining funds needed to complete the purchase are in the form of a loan. The loan amount is based on the appraised value of the home, borrower’s age (minimum 62), and the program/interest rate they choose.

The only difference between a Reverse Mortgage Purchase and a Conventional “forward” Purchase is there are no monthly payments required.  The loan must be paid off eventually just like a conventional mortgage.

Do I have to sell my current home to qualify?

If you have other money available for the down-payment, then you may keep your current home as a rental if you like. Remember this is an owner occupied loan.

Why would someone use the purchase program?

The home most people raise their children in is probably not the home of their Retirement dreams.  One of the biggest reasons they stay is because they have no mortgage payment, and they don’t want their property tax to increase. They are unaware of this new program. They would probably love to move closer to their grandchildren and friends. Perhaps to an Active Adult Community. In a gated secured community. Meet new friends with like interests; no teenagers racing up and down the street; lawns maintained; less maintenance; and an upgraded home. And the best thing…Use Prop 60/90 to keep the same tax base!

UPSIZING WITH LIQUIDITY: A Case Study

A 70- year-old sells his home for $500,000, and PURCHASES A NEW HOME FOR $700,000, AND does not want any monthly mortgage payments.

Without using a Reverse Mortgage for Purchase:

  • Sales Price (old home)
  • Less 8% selling costs (commissions, fees, taxes)
  • Net Proceeds (old home) towards purchase
  • Price of New Home, paid in cash
  • Cash needed to complete purchase of new home
  • $500,000
  • -$40,000
  • $460,000
  • $700,000
  • $240,000

With using a reverse mortgage for purchase (HECM FOR PURCHASE)

  • Sales Price (old home)
  • Less 8% selling costs (commissions, fees, taxes)
  • Net Proceeds (old home)
  • Price of new home
  • Maximum reverse mortgage for purchase money
  • Down Payment from sale proceeds of old home
  • Funds remaining from sale (cash in pocket after purchase)
  • $500,000
  • -$40,000
  • $460,000
  • $750,000*
  • $329,000
  • $421,000
  • $79,000

*Borrower is able to purchase a more expensive home in this scenario

 

This information is intended for use by real estate professionals only and is not to be distributed to the general public. Not all programs and products are available at all times or in all states. All loan programs, terms, and conditions are subject to change or discontinuance without notice, and subject to borrower and property qualifications. Data Mortgage dba Essex Mortgage is an equal housing lender.  The corporate office is located at: 1100 Town and Country Road, Suite 100, Orange California 92868 92868. Tel: 714-935-2581  California Bureau of Real Estate License No. 00936013  California Department of Business Oversight #603-G833  www.nmlsconsumeraccess.org   NMLS #70377   Equal Employment Opportunity / Equal Housing Lender  © 2014 Data Mortgage DBA Essex Mortgage, all rights reserved.

 

 

DOWNSIZING WITH LIQUIDITY: A Case Study

A 65- year-old sells his home for $500,000 and purchases a new home for $350,000, and does not want any monthly mortgage payments.

Without using a Reverse Mortgage for Purchase:

  • Sales Price (old home)
  • Less 8% selling costs (commissions, fees, taxes)
  • Net Proceeds (old home) used toward new purchase
  • Price of New Home, paid in cash
  • Funds remaining (cash in hand after sale & new purchase)
  • $500,000
  • -$40,000
  • $460,000
  • $350,000
  • $110,000

With using a reverse mortgage for purchase (HECM FOR PURCHASE)

  • Sales Price (old home)
  • Less 8% selling costs (commissions, fees, taxes)
  • Net Proceeds (old home)
  • Price of new home
  • Maximum reverse mortgage for purchase money
  • Down Payment from sale proceeds of old home
  • Funds remaining from sale (cash in pocket after purchase)
  • $500,000
  • -$40,000
  • $460,000
  • $350,000
  • $175,000
  • $175,000
  • $285,000

This information is intended for use by real estate professionals only and is not to be distributed to the general public. Not all programs and products are available at all times or in all states. All loan programs, terms, and conditions are subject to change or discontinuance without notice, and subject to borrower and property qualifications. Data Mortgage dba Essex Mortgage is an equal housing lender.  The corporate office is located at: 1100 Town and Country Road, Suite 100, Orange California 92868 92868. Tel: 714-935-2581  California Bureau of Real Estate License No. 00936013  California Department of Business Oversight #603-G833  www.nmlsconsumeraccess.org   NMLS #70377   Equal Employment Opportunity / Equal Housing Lender  © 2014 Data Mortgage DBA Essex Mortgage, all rights reserved.