For the last six years, Andy and Beatrice Hollimon vacationed in the south of Florida. Over time, they fell in love with the area. The warm sun and the cool breezes of the region were a stark difference from the chilly winters of their St. Louis hometown. But, firmly-rooted in the three-bedroom house they owned in the Midwest, the Hollimons had no idea how they might relocate to this popular retirement destination full-time. And it wasn’t until Andy made one fateful phone call, did they learn about a powerful financial tool that would help them buy a retirement home they love and eliminate their monthly mortgage payment – without dipping into savings and investment income.
Countless reverse mortgage borrowers have long-praised the loan for helping them achieve the retirement they want. For those borrowers, a reverse mortgage has allowed them to age in place in the current home they love. But Andy and Beatrice Hollimon had a different idea. They wanted to sell their home and purchase a new one, all while still enjoying the features of reverse mortgage: access to their home equity without having to pay monthly mortgage payments. Fortunately for senior borrowers like the Hollimons who dream of relocating, a reverse mortgage can also enable a new home purchase.
The federally-insured reverse mortgage, known as a Home Equity Conversion Mortgage (HECM), includes a loan called the HECM for Purchase. The HECM for Purchase is a solution that allows borrowers to accomplish two objectives: to purchase a new principal residence and to obtain a reverse mortgage—in a single transaction. With only one set of closing costs to worry about, rather than costs associated with two separate transactions, the HECM for Purchase has proven a very efficient option.
“When I gave American Advisors Group a buzz on the phone to begin evaluating retirement options, I had no knowledge of the reverse mortgage process, let alone awareness of what a HECM for Purchase was,” Andy Hollimon explains. “But when I called AAG, my reverse mortgage professional did a pretty good job of vetting my needs. I told him I owned a home in St. Louis, but wanted to move, and he asked if I had considered a HECM for Purchase, which I had never heard of. He walked me through the HECM for Purchase loan and carefully explained what it was and how it works. Everything ensued from there.”
In Lake Worth, Florida, about 55 miles north of Miami, a 2,000 square foot, three-bedroom house had already piqued the Hollimons’ interest. This model was their “dream” retirement home, but they thought it was out of their price range.
“We thought we would only be able to afford to rent, or buy a home smaller than our 1,300 square foot home in St. Louis,” Holliman shares. With the proceeds alone from the sale of their old home, this may have been true. But the Hollimons’ reverse mortgage professional explained how the HECM for Purchase would work.
There was still an existing home equity loan on the Hollimons’ old house. With the sale of that property, the proceeds would pay off that mortgage first. After that, the Hollimons would use the remaining proceeds towards part of the purchase price of that new home. Then, the HECM for Purchase reverse mortgage would cover the rest of the purchase price. The Hollimons would be responsible for maintaining property taxes, homeowners insurance, HOA fees, covering basic home maintenance, and complying with the other loan terms, but they would now be free from paying monthly mortgage payments associated with a traditional, “forward” home loan.
With a HECM for Purchase, repayment is deferred to a loan maturity event. Loan maturity usually occurs if borrowers leave the home for more than twelve consecutive months and, in less usual circumstances, if the borrowers do not meet their financial obligations. Andy and Beatrice fully intend to age in place in their new home, and are thrilled they don’t have a monthly mortgage payment during retirement.
Following their experience with the HECM for Purchase reverse mortgage, the Hollimons have a clear message for older adults looking to improve their retirement lives:
“We followed our dream to move to our ideal retirement location,” says Andy. “If you have the financial ability, reach for what you want. And for those seniors who aren’t sure what they’ll have the ability to do financially in retirement, I encourage them to look into a reverse mortgage. While this loan might not fit everyone’s situation, it certainly helped us out in ways we never imagined.”
Now, as they bask in the warm Florida sun and relax in their Lake Worth home, it is evident that Andy and Beatrice Hollimon are happy with the results.
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