Second Home Purchases using a Reverse Mortgage

While there are many downsides to the recent real estate market "adjustment", there is a silver lining for those individuals over 62 who are looking to purchase a second home AND also qualify for a reverse mortgage on their primary residence. Here's why....

If you were to utilize cash from your primary residence (via a reverse mortgage) to purchase your new vacation home, you will have obtained a new home without a new mortgage payment. Moreover, since you now own a vacation home free and clear (the mortgage would have been on your primary residence) your ability to "earn money" via appreciating real estate is still intact. Considering the fact that reverse mortgages offer fixed rates in the 5% range currently, this option is very attractive to many recent retirees looking to "live the good life".

Here is a summary of what you get when you obtain a reverse mortgage on your primary residence to purchase a vacation home:

• A vacation home
• A consistent equity position in property that you own - you have only transferred equity from your primary residence to your vacation home.

Here is a summary of what you DON'T get when you obtain a reverse mortgage on your primary residence to purchase a vacation home:

• A new mortgage payment
• The problems associated with taking on a new debt or qualifying for a new loan.

If you have dreamed of owning your own beach house, lake house, ski chalet or trailer in the mountains and you are lucky enough to qualify for a reverse mortgage, this could be the way to go. Happy fishing and enjoy your free vacation home!