Yesterday I was able to participate in a certification course to learn more about Lifestyle Home Loans.
Many may think this is a Reverse Mortgage, but it’s not in the traditional sense; it’s a variation of that.
So… all the commercials you see on TV mid day, those are not advertising this particular product. Unfortunately those often take advantage of people and the consumer has no clue what they’ve agreed to or how it works.
That’s why I wanted to learn more about this specific product so I can properly explain it and also provide it as an option to clients where it makes sense.
Pros:
- No Mortgage Payments to Make Ever!
- You, nor your heirs, are liable for any deficiency if the loan balance climbs higher than property value in the future.
- Surviving Spouse can remain in the home so long as you were married at the time of this mortgage origination.
- FHA Insured Program
- Can get up to 6% Concessions from a Seller to help with Closing Costs
- Can qualify based upon Assets outside of your Existing Home
- Typically a normal 30-day escrow process
- Don’t have to sell your existing home to use it – can convert that into an investment if you have assets elsewhere.
Cons:
- Hefty Down Payment Required, but is based upon purchase price and adjusted for age
- Can only be used on a Primary Residence (not secondary or investment)
Requirements:
- Must be 62 or older or married to someone at least 62
- Minimal Credit & Income (more based on assets)
- Property Taxes & Homeowner’s Insurance are paid by you separately
- Must be a Single-Family Detached Home (PUD) or FHA Approved Complex for Condos/Patio Homes
- Max Purchase Price (match) is $1,149,825 but someone could purchase a more expensive property and bring in the extra difference in cash.
The reality is that 25% of our population is aged 55+ (only a quarter of those live in “Adult” communities) and there’s a surge of Americans turning 65 this year with 11,200 people retiring daily.
Reverse Mortgages began in 1988 so quite a while ago, but remain confusing to most. This Lifestyle Loan Program – called HECM (Home Equity Conversion Mortgage) for purchase was approved in 2009, although many don’t know about it.
Rather than paying full cash for a property in retirement to avoid a payment, this allows you to keep some of that cash on hand for life enjoyment while not having to make any mortgage payments or be responsible for a deficiency should the loan amount eventually exceed property value. The loan interest accrues monthly to add to that loan balance.
If this sounds like something of interest to you or you have more questions, let’s chat. I can then refer you to a qualified loan officer who works with this program since not all do.
