MemberDecember 31, 2021 at 7:24 pm
My wife and I are building our forever home in. We are both 70 (or will be when we move in sometime in the next four months). We are financing the construction ourselves out of pocket with savings of $700,000. The all in value/cost/appraisal of the house when complete will be $750,000. Due to COVID overruns for materials we will need an additional $50,000 to pay the builder. We would like to buy some new furniture, landscaping, and install a dock that would cost approximately $90,000. We are still working full time, but, we would like to retire sooner rather than later. We both receive maximum Social Security income and I have a small but very reliable pension of $1100/mo. Should we buy the house with a HECM purchase? The purchase option HECM is as interesting as it is confusing. Should we scrape up the $50,000 somewhere (HELOC, relatives, personal loan, credit cards, the builder will wait for his money, etc. We can get a certificate of occupancy no problem.) and do a reverse mortgage once we move in for the improvements? The closing costs of a HECM are high. Are closing costs different for a HECM purchase vs. a HECM variable rate mortgage?
AdministratorJanuary 5, 2022 at 6:55 am
Hi Chris, congratulations on the home build! It sounds like you’re already the owner of the property, so you would actually be doing a “refinance” reverse mortgage to recoup a portion of the capital you put into building the home. Assuming a home value of $750K once it’s complete, it looks like you could get a reverse mortgage for more than $400K. That’s a good chunk of money you could put back into the bank from the build. I would check with a few lenders and see what they may be able to offer you. And yes, the closing costs can be high, but they’re not always high. If you start off with a $400K+ reverse mortgage balance, you may be able to negotiate some of the costs with the lender. Best of luck to you and thanks for checking in!
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