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A reverse mortgage could provide the ideal solution for seniors hoping to purchase a Denver area home. Securing a reverse mortgage for purchase is the perfect way for Denver-based seniors to fund the move into the property they need for their aging years without dipping into their existing equity or taking on additional loans they can't afford.
The most common way seniors choose to use a reverse mortgage is to enable them to remain in their existing homes. The equity that the reverse mortgage releases is then used to cover daily expenses amongst older people, such as home modifications, medical expenses, and the cost of in-home care. However, if your existing home is not fit for purpose, or if you fancy a change, then a lesser-known way of utilizing a reverse mortgage is as a reverse mortgage for purchase: to fund the purchase of a new property.
A conventional Home Equity Conversion Mortgage (HECM) will allow homeowners to release the equity from their home. However, a HECM for purchase, or a reverse mortgage for purchase, does require the homeowner to make a cash down payment (just as they would with a conventional mortgage). When you select a reverse mortgage for purchase, you start with no equity because you don't own the new house yet. This cash down payment is generally around 50% of the home's property value you are hoping to purchase; how you raise this money is up to you. This can be either from your savings, gifted from a family member, or increased by using the equity of your current home. However, you cannot purchase a reverse mortgage using borrowed money. Once you have raised and covered the 50% of the property value you need, the reverse mortgage picks up the difference.
Ready to find your dream home in Denver?
Let us help you. Call or Text Kenna Real Estate Group at 303-955-4220 to get personalized assistance from our expert real estate agents.
The Benefits of Choosing a Reverse Mortgage to Purchase a Denver Area Home
Uptake on the reverse mortgage to buy a Denver area home has been prolonged, mainly because many seniors don't understand the benefits of the product or how the product works. However, there are considerable benefits to reap for those who choose to opt for a reverse mortgage for purchase. Firstly, it is a great way to free up the equity you already have in your property. This means you can decrease your monthly outgoings, increasing your monthly disposable income and, therefore, your quality of life without spending any existing cash lump sum, depleting your savings. It will give you the cash you need to enjoy your retirement when you need it.
The reverse mortgage is ideal for retirees rich in property but poor in cash. However, it is essential to bear in mind that while a reverse mortgage will enrich your quality of life, it will reduce the amount of equity you own in your property and will, therefore, not be the ideal option for retirees who are planning to pass their property on to their children or other heirs when they pass away.
Ready to find your dream home in Denver?
Let us help you. Call or Text Kenna Real Estate Group at 303-955-4220 to get personalized assistance from our expert real estate agents.
Age is an Important Consideration
When you decide to secure a reverse mortgage to purchase a Denver area home, your age will affect the amount of money you can get from the loan. When you apply for the loan, the older you are, the less you need to bring from the closing table, and the more money you can get out of the loan to pay for your retirement expenses. However, the longer the loan is in place, the more the existing equity in the property will decrease, meaning that the longer you have a reverse mortgage loan secured against your home, the less cash will be left to pass on to your children or other heirs at the time of your death.
When you choose to take out a reverse mortgage to buy a Denver area home, it's important to remember that you will still be responsible for paying for your taxes, property maintenance bills, and other associated expenses, so retirees taking advantage of this type of home loan must keep enough cash to one side to cover these additional expenses. This is particularly important to bear in mind for homeowners hoping to use a reverse mortgage to purchase a larger property that will, therefore, have more considerable monthly expenses.
