Your parents, in their mid-seventies and now fully retired, are planning to relocate from Washington State to the Midwest to be closer to you and the now college-aged grandkids. The two of you have been helping them search for the perfect suburban home.
Expecting to clear close to $600,000 on the sale of their present home (even in the face of a recent slowdown in real estate sales), your parents were delighted to learn that they can probably purchase – and remodel to their liking – a comparable home for much less than West Coast pricing. They plan to put the excess profit aside towards possible future medical expenses and to fund a travel adventure.
A strategy you might discuss with your parents is a HECM for Purchase reverse mortgage.
Using about $400,000 of their $600,000 proceeds, they could purchase a $500,000 home here in Indiana. The required down payment is only $300,000 and the additional overfunding of the down payment by $100,000 would flow into a Line of Credit. That line of credit would become a growing, cash-like asset from which they could draw for travel, healthcare, or lifestyle needs. Any unused balance will grow at the same rate as that being charged on the mortgage balance.
With a reverse mortgage, your parents would be taking maximum advantage of the move to a more affordable part of the country, while enjoying maximum flexibility in putting their housing wealth to use.