Tuesday, February 26, 2013 -
Joe LaVallie - HomeStreet Bank -
Day 2 Lesson 2
HECM for purchasing income producing properties
In this example you have a 70 year old couple that you sold their house a few months ago. They are living with relatives and are considering buying a small house but the expenses of owning a home and the financial challenges of retirement are motivating them to consider alternatives. They still have the proceeds from the sale of their former residence and some additional income would help them with their monthly budget.
The have $230,000 available from the sale of their house. There is a nice single story duplex that is listed at $275,000. With this loan product they could buy this property, never make a mortgage payment, and create income from the rental of the other unit!
Using a reverse mortgage for purchase (HECM standard)
Sales price of sold home $250,000
Less 8% selling costs $20,000
Proceeds from sale $230,000
Purchase price of duplex $275,000
HECM loan amount $178,000
Down payment $97,000
Remaining cash $133,000
$133,000 of tax free cash, a duplex with no mortgage payments, rental income from the other unit, helping them solve their retirement cash flow issues: Start interviewing for an assistant.
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