On January 1, 2009, the US federal government made it possible for senior citizens to move home for any reason they wanted to. This gave rise to a huge increase in demand for mortgage advisors in Florida who had an understanding of these changes in laws. This has been made possible through the HECM purchase program, but few people really understand what this means.
Mortgage Advisors in Florida on the HECM Purchase Program
In a nutshell, HCEM means that people over the age of 62 can apply for a reverse mortgage on a different property, leading to them not having to make any payments at all. That sounds too good to be true, but it actually isn’t. It does mean that you need to understand the process, however.
Before HECM, a senior citizen would have to take out a reverse mortgage if they wanted to buy a different home and didn’t have the actual cash for it. They would then have to look for a new home and buy it in cash. Then, they would need to sell their old property to pay off the reverse mortgage on that property. And then, finally, they would need to apply for another reverse mortgage on the new property, so that they would have money in their account again. Considering all the various closing fees associated with this, they would often be thousands out of pocket.
Now, however, the HECM allows those over the age of 62 to sell their home and to then use some of the proceeds towards that property, financing the rest with a reverse mortgage. How much they can get depends on how young the youngest owner is, and what the purchase price (or appraised value – whichever is lower) of the property is.
No credit checks have to be completed, seniors simply have to demonstrate that they have some funds available to put towards it. Closing costs can generally be added into the loan. This means that they can keep money in their account for their retirement fund as well. By only investing the minimum as a down payment and keeping the balance, they may also be able to avoid capital gains tax, which is up to $500,000 on primary residences if they lived there for at least two years. This means they end up with even more money in their pocket as well. The benefits, therefore, include:
Not having to pay taxes on any gains on the property up to $500,000.
Not having to use most of your money to purchase a new home.
Being able to live in a new home without any mortgage payments for life.
Being able to bargain on the price of a replacement home.
Being able to purchase a home to the value of up to $417,000.
Being able to retain a lot of tax free funds for your own retirement.
The only real downside is that the system is quite complex to understand, but that is what a professional advisor can help with.