While purchasing your dream home can be very exciting, the road to getting the keys can be a stressful trip for some. Traditions of America has developed a number of innovative programs for our 55+ active adult communities to help prospective homeowners manage their move. Those who have taken advantage of these programs have found their anxieties eased allowing them to make the transition to this new chapter a happy one.
HomePlus is one of these programs, and focuses on a home financing solution known as Home Equity Conversion Mortgage (HECM). HECM is the only type of reverse mortgage insured by the Federal Government and allows for the purchase of a new home without monthly payments.
Traditions of America is proud to be one of the first to offer this financing option and is currently hosting a series of free educational seminars where prospective homebuyers can learn more. These seminars are being led by Julie Didyoung, a HECM Specialist who has helped many of our homeowners understand and utilize this option when purchasing their Traditions of America dream home. We asked Julie to share some insights about HomePlus and what this option could mean for you:
What is the biggest misconception about HECM?
Julie: Many, if not most, people are unaware that a Home Equity Conversion Mortgage (HECM) can be used as financing for the Purchase of a home. HECM for Purchase is a Federal Housing Administration (FHA)-insured program for homebuyers who are age 62 and older and has been available since 2009. Most people are aware of the refinance use of HECM loans that have been available since 1989, but haven’t heard about the newer use of these loans to buy a new residence. It is the same loan program that has been around for over 25 years now, with all the same protections offered by the FHA insurance, but the benefit to the homebuyer is different than the benefit to a current homeowner that is refinancing to “tap into their equity”.
Rather than paying all cash, the buyer makes a onetime investment of about 45% to 55% of the home value, and finances the rest using funds from a HECM. Like a traditional mortgage, the home they are purchasing secures the loan. But unlike a traditional mortgage, there is no obligation of monthly mortgage payments, which helps boost their cash flow. They own the home as long as they live in it. The loan only comes due when they leave or sell the home, or if they fail to meet their responsibilities—which include maintaining the property and keeping current with homeowners insurance and property taxes.
Can you really keep your liquid assets with this solution? How?
Julie: HECM for Purchase home financing can help you preserve more of your savings and invested assets, at the time you purchase your new home, because you don’t have to pay all cash in order to be free of monthly mortgage payments. *
Establishing a retirement financial plan early, without the obligation of monthly mortgage payments, might actually allow you to preserve your assets longer so you have the peace of mind that you can maintain your retirement lifestyle long-term.
* (Of course, as the homeowner you’ll still be responsible for property taxes, homeowners insurance, and property maintenance.) *A HECM is home-secured debt payable upon default or a maturity event.
What is one piece of advice you’d give to anyone considering HECM?
Julie: Have an open mind and learn more about the HECM financing option! Knowledge is power and by learning all of the benefits and protections associated with this financing you will be able to compare it to your other home buying options of paying cash or using a traditional mortgage that requires monthly payments and then make the best choice for you and your unique situation.
I encourage anyone who is age 62 or older to explore this option. I am always happy to explain this program to the trusted advisor (Financial Planner, Attorney, etc.) of a home buyer as well so that the buyer can get the benefit of that person’s educated opinion.
What is the first step to take if you want to explore this option?
Julie: Attend one of Traditions of America’s upcoming HECM seminars or speak with a new home counselor who will put you in touch with myself or someone on my team. We have worked with home buyers at Traditions of America for years and specialize in the use of HECM financing to purchase a home.
Traditions of America Marketing Team
