When you retired five years ago, relocating from the northwest to Indiana to be closer to family, you made the decision to rent a luxury apartment rather than rushing into a permanent home buying choice. As a widow, what with COVID and the crazy competition for homes, you thought it best to postpone purchasing a “forever” house until you get settled in your new location.. These days, while you’ve enjoyed the amenities of your apartment community and the proximity to a big downtown, you’ve been considering becoming a homeowner again, with fewer restrictions and more space to entertain your growing circle of friends, not to mention hosting “sleepovers” for your granddaughters and their friends. A Master Gardener, you’re ready to get back into growing your own veggies and flowers.
Both your children and their partners are doing quite well financially and are not in need of your help. You have been contributing to a 529 plan for all three granddaughters. You will be choosing a home with an eye to aging in place” rather than going to a retirement facility. You have enough money to make a substantial down payment and, even with the escalation in housing prices over the past couple of years, everything is certainly less expensive here than out West. You estimate that the money you now spend on rent would more than suffice to make mortgage payments, plus keep up with normal maintenance (obviously you will seek to buy a home that has been kept in excellent condition).
A reverse mortgage might provide a very good solution to acquiring your “forever home”. A HECM for Purchase is a program insured by the Federal Housing Administration. You would use the resources you’ve mentioned to make the down payment, but, there would be no obligatory monthly mortgage payments. While you’d be responsible for insurance and upkeep of the home, the dollars you now use to pay rent could be used for your own lifestyle needs. Or, consider making non-obligatory payments against your reverse mortgage loan balance. Not only would those serve to reduce the mortgage balance and minimize interest costs, every dollar paid would go correspondingly into Line Of Credit guaranteed to grow at the same rate the mortgage balance accrues interest.
Your financial advisor might agree that this line of credit could then serve as your “cash reserve”, which would allow you to possible invest other cash assets more aggressively in the market.
You’ve gone from owning to renting; now, with the help of a reverse mortgage, you could complete the cycle, going back to owning your own home.