There’s a lot to like about buying a home with cash. You know what you own, you don’t have a monthly mortgage payment, and you can settle into the new place with one less bill arriving every month. For many retirees, that feels like the reward for years of work and careful saving.
But before you write the check, there’s another number worth looking at: what will remain available afterward? A home can be exactly right for your next chapter and still leave you uncomfortable with how much cash it takes to buy it.
Maybe you’d like a reserve for future care or repairs. Perhaps you want to travel, help a grandchild, or keep your investments arranged as they are. Those wishes belong in the home buying conversation, right alongside the kitchen, the neighborhood and the price.
The cash budget may be narrowing the home search
A smaller house isn’t always a less expensive house. The single level layout, newer construction, location near family, or lower maintenance you want may cost more than you expected. An all-cash budget can leave you deciding which features to give up.
For eligible buyers age 62 or older, a Home Equity Conversion Mortgage for Purchase may expand the choices worth considering. You contribute a substantial amount of cash, and the FHA-insured reverse mortgage finances the remaining portion of an eligible new primary residence. There’s no required monthly principal and interest payment while the loan terms are met, and you still own the home… just like any mortgage.
Depending on the numbers, you may be able to buy the home you prefer with less cash than an outright purchase would require. Or you may choose the same home and retain more money for the years ahead. Either possibility deserves a look before you decide that paying cash is your only comfortable option.
Ask what the retained cash would do for you
The value of keeping money available is personal. One buyer wants a generous reserve because unexpected expenses make them uneasy. Another is working with an advisor and would rather compare home financing options before selling investments. Someone else wants enough cash after closing to furnish the house and make it their own without concern over their ending bank balance.
That’s why Richard starts with what you want to accomplish. He will compare an all-cash purchase, conventional financing, and a HECM for Purchase using the same proposed home. You can see the estimated cash required, loan costs, monthly payment structure, and what you’d have available afterward.
The HECM cash contribution isn’t a fixed percentage for everyone. Age, rates, the property and current program rules affect the amount needed for closing. A written illustration gives you something concrete to discuss with your Realtor, advisor and family.
Comfort includes understanding the costs
Keeping cash available comes with borrowing costs. Interest and mortgage insurance accrue on the HECM balance, so what you owe generally grows over time and affects future equity. You’ll continue to pay taxes, insurance, maintenance and applicable association charges, and live in the property as your primary residence. Independent counseling with a HUD-approved counselor is part of the process to help you understand the loan terms.
The comparison will include those details so you can judge what the flexibility is worth to you. Paying cash may remain your favorite choice. You may also decide that keeping a comfortable reserve matters more to you, and choose a purchase structure that lets you settle into the home you want with more cash available.
If you’re planning an all-cash purchase, let’s look at the alternatives before you commit the funds. Call or text 404-313-9785, or email richard.mcwhorter@ridgereverse.com. Your next home should feel good to live in and comfortable to own.
Richard W. McWhorter, NMLS 1618644. Ridge Reverse, powered by Amerifund. Equal Housing Opportunity. Information is subject to change. This isn’t an offer of credit or a commitment to secure a loan. Eligibility and terms vary. This material isn’t from HUD or FHA and hasn’t been approved by any government agency.