American Home Bank, N.A. (AHB) today announced a strategic initiative to meet the needs of persons age 62 and older looking to buy the home of their dreams.
AHB, through its Beacon Reverse division, offers seniors the ability to finance the purchase of a newly constructed home using a reverse mortgage. Since reverse mortgages do not require repayment as long as the homeowners occupy the property, the “reverse for purchase” option allows buyers to finance the new home without also taking on future monthly loan payments.
“Reverse mortgages are ideal for seniors looking to buy down without using all of the proceeds from the sale of their previous home, or buy up without the large payments that a traditional mortgage might carry,” said James Deitch, CEO of AHB. “It’s very rewarding to see that it is becoming easier for older Americans to be able to build the home of their dreams without compromising their financial security,” continued Deitch.
In a purchase transaction, a reverse mortgage could be used to limit the amount of cash a purchaser would need to buy a home without being burdened by debt service. For example, 72-year-old purchasers could buy a $295,000 house in Orlando, Florida by putting down $190,000 in cash plus closing costs. The $105,000 differential represents the proceeds of the reverse mortgage. The purchasers would have no monthly payments to make as long as one of them continues to live in the property.
Most reverse mortgages are sponsored and insured by the Federal Housing Administration (FHA), and all require that applicants receive counseling from an independent, HUD-approved housing counseling agency. Although purchase transactions under other reverse mortgage programs have been available for some time, legislation authorizing FHA to broaden its reverse mortgage program to include purchase transactions is expected to take effect shortly, which will dramatically increase the opportunity to employ these innovative programs in the newly constructed home arena.
“Many seniors looking to move into upscale community living or adult real estate developments will find this product to be an excellent alternative to traditional financing,” said Russell Rothstein, President of Beacon Reverse.
The growth of active adult and senior communities shows that many seniors are attracted to the idea of moving into newly built homes with access to golf, entertainment, communal activities, and to be in the company of others who share their interests. Many of these seniors would find it appealing to build a home without the burden of large monthly payments, which could hamper the lifestyles they are seeking. Still others may be “downsizing” but want to use the proceeds from their current home for travel or other hobbies. A reverse for purchase allows for this freedom without the worry of a monthly mortgage payment.
“Builders developing senior communities should educate themselves on reverse mortgages for purchase. It will be an excellent solution for many seniors,” added Rothstein. He also points out that seniors should take advantage of financial counseling available in connection with reverse mortgages to make certain it is a wise financial choice for the senior. For certain reverse mortgages, independent financial counseling from an accredited non-profit is required. He advises consumers and builders to work with experienced and reputable institutions who can demonstrate a track record with this specialized product. Consumers should also consult a tax and/or legal advisor when looking into a reverse mortgage.
AHB is a national bank providing retail, wholesale, correspondent and joint venture mortgage solutions. The Bank specializes in construction to permanent and residential mortgage lending and offers products from over a dozen national sources. Joint ventures with builders are created through Builder’s Total Control®, a turnkey mortgage company solution that can be up and running in about 30 days. AHB offers reverse for purchase mortgages through Beacon Reverse, a division of the bank specializing in reverse mortgages. For more information about AHB, contact visit www.bankahb.com or www.beaconreverse.com. AHB is a member FDIC and Equal Housing Lender.