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#2: Should I Pay Cash for My Retirement Home?                       

It’s An Essential Question

You’ve worked your whole life. You’ve saved for it, and now it’s time to buy your retirement home in the mountains, the beach, or wherever your heart takes you. You’re selling your current home and considering paying cash for your new retirement home.

Moving for the beauty and lifestyleis a great move!

Paying Cashmay not be the right move.

Before you spend your bank of home equity, which has taken decades to accumulate in order to pay cash for your new home, stop to answer this essential question: Why would you pay cash for your retirement home?

Because you can, is not a good answer. Because you don’t want a mortgage, is not a complete answer.

People pay cash, so they won’t carry a mortgage paymentinto retirement. It’s smart not to carry a mortgage payment into retirement, as it could be risky.                                           …However, there is a better way than paying cash for your retirement home.

HECM for Purchase     

Smarter than paying cash, utilize a unique mortgage, developed by the Dept. of Housing and Urban Development (HUD) and insured through the Federal Housing Administration (FHA), known as a Home Equity Conversion Mortgage (HECM). Pronounced “Heck-Em”, this new program, launched after the credit crises of 2008, is specifically for the 62+ age group to preserve your cash reserves, enhance retirement income planning, and expand housing choices through retirement.

The HECM for Purchase(H4P) is for primary residences and never requires a mortgage payment. This loan allows you to put down a portion of the price of the home, which is determined by the age of the youngest borrower, and you keep the rest in cash.

Some key points of an H4P are:

  • You must live in and maintain the home as your primary residence
  • You are still required to pay annual property taxes and homeowners’ insurance
  • You hold title as owner of the property
  • Because it’s FHA insured, you can never owe more than the home is worth 
  • You are never required to make a monthly Mortgage Payment!

Retirement experts hail the H4P as a smart and prudent alternative to tying up your cash in home equity. As Wade Pfau, Ph.D. CFA and Professor of Retirement Income, at the American College of Financial Services says; 

“The HECM for Purchase program allows for fewer distribution needs from the investment portfolio, because a greater portion of the home’s cost can be financed by the reverse mortgage.”

Qualifying for a HECM

HUD has made significant enhancements to this HECM for Purchase option, to document a person’s ability to sustain the home and ensure a surviving spouse can live in the home forever. Once the last remaining borrower leaves the home permanently, the estate controls ownership, retains the equity and has up to one year to settle the loan balance.

To qualify you must:

  • Be at least 62 years of age
  • Make a 50%-65% down payment
  • Pay property taxes and homeowner’s insurance
  • Live in and maintain the home as your primary residence

Cash is King:

Throughout retirement cash is far more valuable than equity. Retirement income planning requires thoughtful allocation of your cash assets. Running out of cash in your later years is an issue you must confront now, as you consider paying all-cash for your retirement home.

For 113 years, Mutual of Omaha Mortgage has been protecting families and those precious assets you care about. Mutual of Omaha Mortgage carries on that tradition. Our exclusive “Lifestyle Home Loan” is your access to the HECM for Purchase Program.

So, when buying your retirement home…think carefully.                                        Consider a HECM for Purchase, to preserve and protect your precious cash assets for all the good years in front of you. Because you have so much more living to do!

Paul Donohue  

Click below to receive a free brochure on Mutual of Omaha’s Lifestyle Home Loan, designed to make the most of your home purchases in retirement.                                                                                                     

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. If your heirs want to keep the home after your death, they will have to repay either the full loan balance or 95% of the home’s appraised value, whichever is less.