Emily and Steve, both in their early 70s, found themselves in a situation where their family home no longer suited their needs. The spacious house and expansive yard, once perfect for raising their children, had become burdensome to maintain. With their adult children living away from their town, they decided it was time to search for a more suitable home that could accommodate their needs as they planned for life in their later years.
Initially, they considered selling their current home, which they estimated would yield around $500,000 in proceeds. However, the cost of the newer, more convenient home they desired was approximately $650,000. They debated between taking out a small mortgage of $150,000 or withdrawing the same amount from their retirement savings. Seeking financial advice, they were introduced to Renee Duval, who suggested exploring
In addition the line of credit grew organically as line of credit growth on a HECM is the same as the interest rate on the loan balance!
After careful consideration, Emily and Steve opted to invest $450,000 from the sale of their house into purchasing their ideal retirement home. They allocated the remaining $50,000 towards a memorable vacation and acquired a new car. Utilizing a Home Equity Conversion Mortgage (HECM), they were able to make flexible payments of any amount, whenever they chose. By making voluntary payments, they effectively managed to keep their loan balance low while simultaneously increasing their line of credit. That’s right, by making voluntary payments they grew their line of credit because every payment you make on a HECM with a line of credit, increases the line of credit dollar for dollar. This strategic approach not only allowed them to maintain financial stability but also provided a cushion or buffer asset for unforeseen expenses in the future.
Conclusion: In summary, while a reverse mortgage offers financial flexibility and the opportunity to downsize comfortably, it's essential to understand the responsibilities that come with it. Although homeowners are not required to make monthly mortgage payments, they remain responsible for taxes, insurance, utilities, association fees (if applicable), and the maintenance of their property. Nonetheless, for Emily and Steve, the decision to downsize using a reverse mortgage has provided them with peace of mind as they embark on this new chapter of their lives.
