Using a Reverse Loan to Fund a Move
May 18th, 2010
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- Reverse Mortgage Can Provide Cash for Basic Living Expenses
- Using a reverse mortgage to relocate during retirement
- Using an HECM to relocate
- Sell Your Home So You Can Downsize with a Reverse Mortgage
- Reverse Mortgage Could Help You Downsize to One of “Best Places to Retire”
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Are you interested in rankings of the best place to retire? There are several lists out there that rank places to live based on a variety of factors that include climate, cultural activities, recreational opportunities, and affordability. Among the publications that come out with rankings each year are Money, U.S. News, AARP, and Smart Money.
What Makes it the Best?
If you are thinking of relocating, make sure you understand all the criteria that go into compiling a “best places” list. Of course you must visit a location to determine if you can feel comfortable living there. And think about how you would pay for a move. One source of funding could be a Home Equity Conversion Mortgage (HECM).
HECM for New Home Purchase
The Department of Housing and Urban Development allows reverse mortgage proceeds to be used to purchase a new home. You cannot use the money to buy a vacation home. The house you buy must be used as your principal residence.
Pros and Cons of Reverse Mortgages
One advantage to using the HECM to relocate is that you can move to the area you want to live in without taking on monthly mortgage payments. Another plus is that you could use a reverse loan to move away from an area with a high cost of living. If you have a fixed income, it can be very difficult to keep up with bills in more expensive housing markets such as New Jersey or California.
A disadvantage to getting a reverse mortgage loan is that you need a decent amount of home equity to borrow money. But with a reverse loan you won’t be able to borrow 100% of your home equity even if you own a home free and clear. The amount you can borrow depends your age, a property appraisal, and current interest rates. Also, borrowing with a reverse loan may decrease the amount of inheritance you can leave to heirs.
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