Senior homeowners face many decisions as they near retirement and begin planning for the future. While a secure income stream may be awaiting some, the reality for many will be crucial conversations about meeting financial goals and maintaining a lifestyle they can enjoy. This begs the question of Downsizing vs. HECM: Which Is Right For You?
These discussions will likely begin with a fundamental question: Where will you live when you retire? For those whose home is among their biggest assets, it may come down to a choice between downsizing to a smaller, more affordable home or keeping your existing home and obtaining a Home Equity Conversion Mortgage (HECM). The best option will depend on the specifics of the situation, but there are some critical factors to keep in mind to help guide the decision.
As with most real estate decisions, location will play an important role. Downsizing a home allows the owner to cash in on all of the equity in a home, and use it toward the purchase of smaller, less expensive one. The remaining funds can be used to support retirement.
However, if downsizing to the desired location requires putting most or all of the equity toward the new home, there may be little financial upside. In these cases, using a HECM for Purchase may provide a combination of financial security and the perfect location.
Qualifying for a HECM requires applicants be at least 62 years old. Age also determines how much equity a homeowner can tap into. Downsizing, and paying cash for a smaller home, does not have any age requirements. This could give younger retirees access to more of their home equity, sooner.
A major advantage to a HECM is that the Line of Credit or monthly advances from it can be guaranteed for as long the homeowners live in the home, as long as the HECM is in good standing, even if the mortgage surpasses the value of the house. And if a borrower becomes ill, they could be out of the home for up to a year; however, if health issues permanently force the residents from the home, the loan will come due. Downsizing can’t provide the same guaranteed access to funds, but may offer more flexibility if the owners can no longer reside in the home.
The importance of passing assets on to a future generation is another serious consideration. A HECM will reduce the proceeds from the sale of the home that can be left to others because the loan will need to be repaid first, but other assets would be protected even if the amount due exceeds the home’s value. A decision to downsize would not create any new debt, and the home could be passed on at full value.
Planning for retirement is not a simple task, but having accurate information from a trusted source can make it easier. To find out more about how a Reverse Mortgage can work for you call Melinda Hipp , CRMP with Open Mortgage at 210-493-7332, email at firstname.lastname@example.org or visit texasreverse.net to learn more.
More about Melinda Hipp and Open Mortgage -
Melinda Hipp is Branch Manager with Open Mortgage|San Antonio and specializes in working with senior homeowners 62 and over who would like to access the equity in their home through a Reverse Mortgage. She has handled hundreds of satisfied Reverse Mortgage clients over the past ten years with many raving fans. She and her team are dedicated to giving you boutique service, a quick closing and personalized customer service.
Melinda regularly provides training to local real estate professionals and holds the designation of MBA, CRMP (Certified Reverse Mortgage Professional) and CMC (Certified Mortgage Coach.) Melinda is also an active member of NRMLA (National Reverse Mortgage Lender’s Association). An avid golfer, Melinda was a charter member of the San Antonio Chapter of the Executive Women’s Golf Association. She is currently a member of the National Reverse Mortgage Lender’s Association, Women’s Council of Realtors, San Antonio Board of Realtors, CRS and a board member of Golf San Antonio.
Melinda Hipp, CRMP | NMLS #219085
1870 W. Bitters Rd., Ste. 202
San Antonio, TX 78248
Toll Free: 844-265-5513