A New Solution to Owning Your Dream Home in Retirement
by David Leslie
Are you on the plus side of 62? Have you dreamed of buying a new, low-maintenance home in Elements at Viridian, but market uncertainty is giving you pause?
On one hand, you want to be close to friends and family in a new home with upgraded features and energy-efficient appliances. On the other hand, you’re concerned about preserving your retirement portfolio after the recent downturn and you don’t want to increase your planned cash flow each month.
Is there a way to purchase your new home in Elements at Viridian and enjoy the parks, the walking paths, the clubhouse with planned activities and the awesome community with new neighbors…all while ensuring your liquidity?
In a word - Yes!
If you’ve considered making a “rightsizing” or “downsizing” move, but don’t want a large monthly payment or a dip into your retirement savings to pay for it, then you need to learn about the Home Equity Conversion Mortgage (HECM) for Purchase, aka H4P.
What is Home Equity Conversion Mortgage for Purchase (H4P)?
The H4P program allows borrowers, aged 62+, to increase their home purchasing power, eliminate monthly mortgage payments and get the house they really want while preserving their life savings. View a quick 3-minute video that summarizes the program:
Buying Your Dream Home in Retirement from Mutual of Omaha Mortgage on Vimeo.
What are the FHA requirements for securing a H4P loan?
There are 3 basic rules to qualify for this FHA-insured program in Texas:
- You and your spouse (if you’re married) must be at least 62 years old.
- The H4P program may only be used on your primary residence.
- The money brought to closing must come from current asset accounts or a gift; it cannot be money acquired through debt.
It’s that simple! If you meet these qualifications, you’re on your way to purchasing your dream home without depleting a large portion of your retirement nest egg.
Although the H4P eliminates the need for monthly mortgage payments, it does not erase home-ownership responsibilities. You’ll still need to pay your property taxes and homeowner’s insurance, maintain the home and cover any homeowner’s association dues.
FHA requires a “financial assessment” as a condition of securing this loan. The assessment helps determine the homeowner’s ability to pay these ongoing costs. FHA also requires every prospective H4P borrower to complete a counseling session with an independent, HUD-approved counselor. This session can be done over the phone and provides you with an impartial education about the H4P program.
How is it possible to avoid monthly mortgage payments? All FHA loans require mortgage insurance. If you (or your heirs) decide to sell the home and the loan balance exceeds the home’s appraised value, then the lender collects the deficiency from FHA. There’s no recourse to you or your heirs for any mortgage payments or deficiencies.
Do I own the home with a HECM for Purchase (H4P) mortgage?
So…do you actually own the home? I need to be very clear here…Yes! You (and your spouse) are the only ones on legal title. The H4P is simply a mortgage lien; like the lien created with traditional financing. If you maintain the home as your primary residence and keep the property taxes, homeowner’s insurance and HOA dues current, the lien does not have to be paid and you can live in your home without mortgage payments until the last borrower vacates.
When you (or your heirs) decide to sell the home, any equity remaining after the mortgage lien is paid is yours. If there is a deficiency, the FHA mortgage insurance covers the difference with no recourse to you (or your estate).
Congratulations! You’re now aware of a little-known strategy that allows you to leverage your retirement income and eliminate mortgage payments while enjoying your dream home. I welcome a call or an email with questions you may have about this program. I’m happy to schedule a face-to-face (or Zoom) meeting with you and your family and/or financial advisor to discuss details specific to your situation. I look forward to hearing from you.
About the Author
David Leslie (NMLS #168176) has over 23 years’ experience in the mortgage industry and is a HECM for Purchase Specialist with Mutual of Omaha Mortgage (NMLS #1025894). He’s a graduate of the University of Texas at Austin and an Air Force veteran. To contact David or learn more about H4P, visit https://Mutual62.com/David-Leslie or give him a call @ (817)597-0253 or send an email to: firstname.lastname@example.org.
The views expressed in this blog are not those of Viridian nor Johnson Development. This information is provided as a resource. Please verify all information independently before making a decision to purchase a home.