(Editor’s note: To protect their privacy, we abbreviated the names of the couple we interviewed.)
For the past 45 years, Mr. and Mrs. F., who are 78 and 76, respectively, lived in a two-story home built in the 1930s that was perfect for a young couple raising two kids, but was becoming increasingly more difficult to live in as they got older. Recently, the couple used a reverse mortgage to purchase a newer condo just across town that’s easier to navigate and requires less maintenance.
Mr. and Mrs. F. have been married for almost 57 years. “Shortly after my husband was discharged from the Army, we met at a drive-in on New Year’s Eve in 1964 and married three months later,” says Mrs. F. “I am originally from Oklahoma. After we got married, we moved to Mount Vernon, OH – which is located in the middle of the state 50 miles northeast of Columbus – and have been there ever since.”
Mr. F. spent the bulk of his professional career building truck axels, while Mrs. F. worked as an office manager for several small businesses. The couple have a lot of fond memories of the house they bought in the mid-1970s, but they both knew it was time to downsize.
“Our kids grew up in that house,” says Mrs. F. “It was a great home for us, but now that we’re in our mid-70s, the maintenance was getting to be too much. I had a knee replacement, so walking up and down the stairs was painful.”
The couple hired a Realtor to find them a new home. “The immediate challenge we faced was that our home sold before the “For Sale” sign was even placed in the yard,” says Mrs. F. “We moved in with our daughter until we found a place.”
While there were a couple of single-family residences on the market, all of them had stairs. The Realtor recommended a condominium that had recently become available and suggested they contact Mark Kelly, a reverse mortgage specialist with Mutual of Omaha Mortgage, who lived nearby.
“Mark came over and explained the reverse mortgage. We’re living on fixed incomes, so it sounded like it would benefit us. It surely has. We’re still settling into our condo, but it’s feeling good,” says Mrs. F.
While most reverse mortgages made today are for people who want to age in place in their existing home, in 2008, Congress authorized the Federal Housing Administration to create a purchase option for its Home Equity Conversion Mortgage (HECM) program.
Under the HECM for Purchase program, the borrower takes funds from the sale of the previous home or from savings and combines those proceeds with funds from the reverse mortgage to purchase the new property outright, thus eliminating a monthly mortgage payment.
As with all reverse mortgage transactions, Mr. and Mrs. F. were counseled by an independent, HUD-approved housing counselor – in their case it was with Money Management International – to ensure they fully understood how their reverse mortgage worked.
The couple qualified for a variable-rate reverse mortgage at a 2.61 percent interest rate. The asking price for the new condo was $175,000. After selling the old home and paying off what was left on the existing mortgage, the Fesler’s were left with $84,000 in net proceeds. They took $75,000 from that amount and combined it with $100,000 from the reverse mortgage to buy the condo.
There was an additional wrinkle in the transaction in that the condo they were purchasing needed to go through the process of becoming FHA approved. Mark Kelly, their loan officer, provided a questionnaire from FHA that Mrs. F. shared with the president of the condo association. Once the questionnaire was filled out and the information requested by FHA was collected by Mrs. F. and shared with Mark, the approval process was concluded in a matter of weeks.
The condominium property is comprised of 12 units. Rather than seek approval for all 12 units, which would have taken longer and could have faced bigger hurdles, Mutual of Omaha Mortgage was able to seek FHA approval just for the couple’s unit.
“Luckily, I know the president of the condo association’s Board of Directors,” says Mrs. F. “He introduced us to the other unit owners. Everyone was very nice.” And nobody objected to the FHA approval process, which can sometimes be a challenge in many larger condominium associations.
Mrs. and Mrs. F. love their new condo, which has two bedrooms, two baths, a kitchen, living room and a two-car garage. “It’s a really cool neighborhood. Everybody is really nice. All older. No stairs. And my husband doesn’t need to mow,” says Mrs. F. “Some of the condos have basements or an upstairs area, but ours does not, which is really nice.” After they moved in, their son drove up from Jacksonville, FL and spent two weeks painting the new place and getting things in order. The couple also have a daughter who lives in Mount Vernon “and she has been stopping by after work to help put things away.”
“Our son and daughter-in-law both work for Chase and so they spoke with Mark and were really instrumental in helping explain things about the reverse mortgage to us,” says Mrs. F.
“Our kids were very supportive about us getting a reverse mortgage,” she adds. “I absolutely would recommend a reverse mortgage for someone who’s looking to change homes. It was stressful to understand the ins and outs of it, but this condo is the best house we’ve ever lived in. We loved our other house, but it was old and needed to be cared for whereas we have newer things in our condo, because it was built in 2004.”