Hartz Homes has seen recent interest in home financing that gives seniors the ability to buy a new construction house with the advantages of a reverse mortgage. Reverse mortgages are known as a way to supplement a senior’s fixed income by tapping equity that has accrued in their home. But, reverse mortgages also can be used to buy a new home with a Home Equity Conversion Mortgage, or HECM.
Following is an overview of this program from Hartz Homes. For more detailed information, please contact our preferred lender.
What’s a reverse mortgage?
A reverse mortgage is a type of home equity loan that allows homeowners to borrow against the value of their homes. No repayment of the mortgage (principal or interest) is required until the borrower dies, or the house is sold. They are designed for older Americans whose net worth was tied up in the homes they already owned.
You can use a reverse mortgage to buy a new home.
Seniors who are empty nesters or otherwise find that their existing home no longer fits their needs can use a HECM reverse mortgage to purchase a new primary residence. Here are the conditions:
- The minimum age is 62 years old.
- Borrowers must own the property outright or have a considerable amount of equity in it.
- The home must be the borrower’s primary residence.
- The borrower must be able to pay the home’s property taxes, insurance premiums, homeowners association dues and any other ongoing property costs.
- The borrower must have no delinquent federal debt.
- The property must pass certain requirements, such as meeting all FHA standards and flood requirements.
Easier to buy a new construction home
A change implemented in October, 2017 has made it easier to get a reverse mortgage on a new-construction home. Previously, a certificate of occupancy was required on the property at the time the loan application was submitted. Now, that paperwork may be provided any time up to when the loan closes.
How this reverse mortgage works
The home buyer puts down the difference between the purchase price of the new home and the HECM loan amount. This amount is paid in cash from the sale of a former home or other assets.
There are no monthly payments as with a typical mortgage. Instead, the loan is repaid when the home is sold or the borrower moves out or dies. The repayment to the lender includes the amount borrowed, plus accumulated interest. Any remaining equity belongs to the borrower, heirs, or estate.
This is not just a mortgage product. It’s a financial, cash-flow tool for retirees, as it gives them more purchasing power if they don’t want to drain all their assets. It also gives them the luxury to get a better lot, to add all the upgrades they want and to still have no mortgage payment. And, in many cases, the older you are, the better it works.
The bottom line
A reverse mortgage for purchase allows older Americans to buy a house that better suits their needs without dumping all their retirement assets into it, which would be the case in an all-cash transaction. It also lets them avoid dipping into their monthly fixed income, which would occur if they took out a traditional mortgage.
Note: Hartz Construction Co., Inc. is an expert home builder, not a mortgage expert. While believed to be accurate, Hartz Construction Co., Inc. is not responsible for any inaccurate information in this article. You should consult with your financial expert.
Please check out these new home communities from Hartz Homes:
Armitage Pointe of Addison, Illinois (Chicago area new home construction)
Bella Vista Townhomes of Bolingbrook, Illinois (Chicago area new home construction)
Lago Vista of Lockport, Illinois (Chicago area new home construction)
Leigh Creek of New Lenox, Illinois (Chicago area new home construction)
Marquis Pointe of Montgomery, Illinois (Chicago area new home construction)
Marywood Meadows of Montgomery, Illinois (Chicago area new home construction)
Nantucket Lakes of New Lenox, Illinois (Chicago area new home construction)
Oliviabrook of Oakbrook Terrace, Illinois (Chicago area new home construction)
Park West of Manteno, Illinois (Chicago area new home construction)
Playa Vista of Plainfield, Illinois (Chicago area new home construction)
Shannon Estates of New Lenox, Illinois (Chicago area new home construction)
Sky Harbor of New Lenox, Illinois (Chicago area new home construction)
Whisper Creek of Mokena, Illinois (Chicago area new home construction)
Hartz Homes has new home communities in:
Addison, Illinois (Chicago area new home construction)
Aurora, Illinois (Chicago area new home construction)
Bolingbrook, Illinois (Chicago area new home construction)
Lockport, Illinois (Chicago area new home construction)
New Lenox (Chicago area new home construction)
Manteno, Illinois (Chicago area new home construction)
Montgomery, Illinois (Chicago area new home construction)
Plainfield, Illinois (Chicago area new home construction)
Oakbrook Terrace (Chicago area new home construction)