Upsize Your Lifestyle while Downsizing Your Mortgage

Despite the challenges of 2020, or maybe because of them, many people decided that it was a good year to move to a new house. Pre-retirees and retirees move to what they hope will be their last home.

Most people want homes that are easy to navigate and are low maintenance as they prepare for their future. Retirees need to purchase a home that meets their lifestyle desires but doesn’t impact their financial planning.

Two couples share what went into their decision to buy and why they chose a non-traditional financing method to help make that happen.

“What was important to us was getting a home that was a little bit smaller and that had single-floor living and low-maintenance obligations for us,” say Ed and Sandy. “We were reducing our home’s square footage, but we wanted to upsize our lifestyle at the same time. Freeing up time that we had spent maintaining a large home was liberating for us, but just as liberating was being able to free up a significant amount of our monthly cash flow that had been going to meet a monthly mortgage payment.

“Our home sales consultant introduced us to the concept of a Home Equity Conversion Mortgage [commonly referred to as a HECM for Purchase (H4P)], and we were blown away by what it would do for our lifestyle. We were buying a house that was about $250,000 less in value than what we were leaving, but we still had about $300,000 left on a mortgage. And, we were going to need to finance a portion of our purchase. The H4P, opened up some opportunities for us that we weren’t aware of. We eliminated $1,700/month and freed up some of the proceeds from our old house’s sale to work in our retirement plan. Even better, with the recent surge in home values and lower interest rates in 2020, we were able to work with our lender again to increase the equity available to us by over $60,000 less than two years after we originally closed.

“We are so thankful that our sales consultant suggested we look at an H4P loan to buy our new home. Sandy and I have so much less stress not having to make a monthly payment and having access to the liquidity tied up in our former home. And if we get a relatively modest growth in home value, we should maintain our equity in our new home well into the future.”

Kim and Jan also bought their “new” home back in 2018 when they decided to relocate to the Triangle area of North Carolina from their Florida home. They had moved to Florida years ago to be closer to their daughter and her family, but as their grandchildren aged and were approaching high school graduation, they decided

“Our Realtor introduced us to a loan officer locally who works with the H4P loans, and we were completely sold on it even before we started the process.” to make a move to an area that had a more seasonal climate that they were both looking for in their life.

“We were ready to make a move and decided on the Triangle area and eventually picked Cary, NC,” says Kim. “Our Realtor introduced us to a loan officer locally who works with the H4P loans, and we were completely sold on it even before we started the process.

“We had a HECM loan on our Florida house, and what we had to work with made our options somewhat limited in a hot housing market like Cary. We had to search hard to find what we were looking for, but we eventually found it, and using the HECM left us enough funds to be able to remodel and put the touches on our new home that made it ours.”

If you’re thinking about making your move in 2021, now would be a great time to learn whether the H4P option makes sense for you. Obviously, if you will have to finance a portion of your new purchase price, it’s an option. Still, increasingly we are seeing cash buyers utilize the H4P because it gives them greater liquidity and more flexibility than having the entire home value locked in the bricks and mortar of their new home.