Should I Pay Cash For My Retirement Home?

It’s An Essential Question

You’ve worked your whole life; you’ve saved for it, and now it’s time to buy your

retirement home in the mountains of North Carolina. You’re selling your current

home and you want to pay cash for your new retirement home.

Coming for the beauty and lifestyle…is a Great Move!

Paying Cash…may not be the Right Move.

Before you spend your all the Equity from the sale of your home, which has taken

decades to accumulate in order to pay cash for your new home, stop to answer

this essential question:

Why would you pay cash for your retirement home…WHY?

Because you can, is not a good answer.

…Because you don’t want a mortgage, is not a complete answer.

People pay cash, because they don’t want a mortgage payment in retirement.

That is Smart, because it’s risky to carry a mortgage payment into retirement.

…However, that does not mean you should pay cash for your retirement home.

HECM For Purchase

Better than paying cash, would be to utilize a unique mortgage, developed by the

Dept. of Housing and Urban Development (HUD) and insured through the Federal

Housing Administration (FHA), known as a Home Equity Conversion Mortgage

(HECM). Pronounced “Heck-Em”, it was newly developed in 2009 after the credit

crises, specifically designed for the 62+ age group to enhance retirement income

planning and increase housing choices through the retirement years.

…the HECM is a Retirement Mortgage, with no payment required!

The HECM for Purchase(H4P) is for primary residences and never requires a

mortgage payment. This loan allows you to put down a portion of the price of the

home, which is determined by the age of the youngest borrower, and you keep

the rest in cash.

With a H4P:

 You hold title as owner of the property,

 Because it’s FHA insured, you can never owe more than the home is worth,

 You are never required to make a Monthly Mortgage Payment!

 You pay your annual property taxes, and homeowners Insurance.

Retirement experts hail the H4P as a smart and prudent alternative to tying up

your cash in home equity. As Wade Pfau, Ph.D. CFA and Professor of Retirement

Income, at the American College of Financial Services says;

“The HECM for Purchase program allows for fewer distribution needs from the

investment portfolio, because a greater portion of the home’s cost can be financed

by the HECM mortgage”.

Qualifying for a HECM

HUD has made significant enhancements to the program to document a person’s

ability to sustain the home and ensure a surviving spouse can live in the home

forever. Once the last remaining borrower leaves the home permanently, the

estate controls ownership, retains the equity and has up to one year to settle the

loan balance.

To qualify you must:

 Be at least 62 years of age,

 Make a 50%-65% down payment,

 Pay annual property taxes and homeowner’s insurance,

 Live in and maintain the home as your primary residence.

Cash is King

Throughout retirement cash is far more valuable than home equity.

Today, Boomers are projected to live much longer than previous generations.

Retirement Income Planning requires thoughtful allocation of your cash assets.

Running out of cash in your later years is an issue you must confront now, as you

consider paying all-cash for your retirement home.

For 113 years, Mutual of Omaha has been protecting families and those precious

assets you care about most. Our exclusive “Lifestyle Home Loan” is your access to

the HECM for Purchase Program.

So, when buying your retirement home…think carefully. Consider a HECM for

Purchase, to preserve and protect your precious cash assets for all the good years

in front of you.

…because you have so much more living to do!

By, Paul Donohue, Retirement Mortgage Specialist

You can reach Paul at pdonohue@mutualmortgage.com