If you’re like many empty-nester retirees, you may be living in a home that is entirely too big for your needs. Especially if you upgraded your family’s home at some point while your children were growing up, chances are, you’re following along an American trend of bigger houses over time.
In percentage terms, the average home size has increased by 62% since 1973, while the median home size increased by 64%, according to U.S. Census data published in 2014. In 2015, the average new home in the U.S. was more than 2,800 square feet.
Have you thought about downsizing? Traditionally, this involves two transactions: first, selling the current home and second, purchasing a new home that is smaller and more manageable. But there’s also another way to downsize: by using a reverse mortgage.
The Home Equity Conversion Mortgage (HECM) for Purchase loan is a specific type of reverse mortgage that allows you to purchase a new home and get a reverse mortgage in a single transaction.
Why include the reverse mortgage?
You could downsize by selling and then purchasing another home, but using a reverse mortgage allows you to eliminate any mortgage payments you would ordinarily have to make. In other words, you can use the reverse mortgage proceeds to purchase your new, smaller, more manageable home, and never make another mortgage payment toward your loan.
Depending on your financial situation, you may also be able to receive payments from your new home equity, or you may be able to take out a line of credit that you can draw on at any time, offering you flexibility and a “rainy day” fund, should you need it down the road.
A reverse mortgage for purchase is still a loan, and comes with certain terms and requirements. If you’re interested in how a reverse mortgage can help you downsize, contact an experienced loan originator for more information.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.