I’m sure you’ve heard of downsizing in retirement, but have you ever considered using retirement as the time to finally get into the home of your dreams?
Some would say that you would need to sell your home in California and move to a much less expensive location in order to accomplish this without having a mortgage payment. In actuality, upsizing may be possible in the same neighborhood that you actually live in right now.
You may have seen the previous article about using the HECM for purchase in order to purchase a home in retirement without a payment, and add more investment dollars to your bottom line. But what if you weren’t concerned about adding investment dollars, only upsizing the house?
Using the HECM for purchase to upsize is also a possibility. Let’s look at an example…
Bob and Amanda are ages 65 and 67, respectively, and would like to sell their $600,000 home in order to purchase an $850,000 home. Traditionally, they would need to add more than $250,000 to the equity they receive from the sale of the home in order to pay cash for the upsize home and have no mortgage payment.
But using the HECM for purchase, they will only need to put $550,000 down on the $850,000 home, and still not actually have a required payment. In fact the transaction nets them $50,000 of extra cash to do upgrades on the new home if needed.
The difference between the $850,000 sales price and $550,000 down payment is the amount that goes on the HECM for purchase loan. This loan has no required repayment. If no payment is made over time, it will reduce the legacy value of the home to pass on to heirs, but it can never obligate the heirs to be in a position to owe anything when the home is sold.
If you have any questions about how to utilize the HECM for purchase, please contact me.