Reverse Mortgage Purchase Strategy

The Reverse Purchase Strategy may allow financial planners to help seniors who are exceeding a safe portfolio withdrawal rate because they have an unsustainable income/expense profile.

House For Sale 

People who do not understand the Reverse Purchase Strategy are missing out on a powerful solution to three common senior problems: (1) insufficient cash, (2) a broken monthly budget, and (3) living in a house that is less than ideal or just unsafe. The centerpiece of this strategy is using a reverse mortgage as a purchase-money loan. You can’t say this is a misunderstood strategy because almost no one knows anything about it. 

Below we'll cover five key points...

1) The 4 parts of the reverse purchase strategy

2) An example of the strategy

3) Who needs it and who is involved

4) How it benefits seniors

5) Demographic trends and opportunities


The 4-Part Reverse Purchase Strategy

1) Sell a house that doesn't fit - too big, two story, too expensive

2) Buy a better house with a HECM - no monthly mortgage payment

3) Invest or save excess sales proceeds to create a cash cushion

4) Minimize property taxes - e.g., CA Prop 60/90; TX tax freeze portability


Reverse Mortgage Purchase Loan

Before we go further, let’s quickly review reverse mortgage basics. It is a non-recourse loan, based on equity in a home, that does not get paid back until the last borrower sells or permanently leaves the house. If the house isn’t worth as much as the loan balance at the end, that’s not the borrower’s problem – the shortfall is forgiven.

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