Video Transcription of “H4P Loans: The 62+ Buyers Strategy Every Real Estate Pro Should Know“
H4P Loans: The 62+ Buyers Strategy Every Real Estate Pro Should Know.
Baby boomers, now between ages 60 and 78, are one of the most powerful forces in today’s housing market, making up 42% of all home purchases.
Backed by trillions in home equity, they’re well positioned and ready to make their next move. But even with equity on their side, many face a major dilemma. They’re hesitant to add retirement risk by taking on a new monthly mortgage payment, giving up their low rate mortgage, or draining savings to pay all cash.
Enter the H4P (Home Equity Conversion Mortgage for Purchase). It’s a government-insured reverse mortgage designed to help home buyers 62 and older purchase a new home without making monthly mortgage payments. With an H4P loan, your client typically puts down 45 to 70% of the purchase price, and the rest is funded through the loan. The exact down payment depends on factors like the youngest borrower’s age and current interest rates.
They own the home just like with a traditional mortgage and only need to cover critical property charges like taxes and insurance. Interest and mortgage insurance premiums are added to the loan balance over time, with repayment deferred until the end of the loan. If your clients want to pay it down, they can make voluntary prepayments and help manage their balance.
An H4P loan becomes due when the last borrower moves out permanently, is unable to live in the home for 12 consecutive months due to illness, or passes away. The loan is typically repaid by selling the home. Importantly, H4P loans are non-recourse. The borrower or their heirs will never owe more than the home’s value at the time of sale. FHA insurance will cover any shortfall, ensuring financial protection for your clients and for their loved ones.
So what’s driving so many seniors to move? For a lot of them, it’s about getting closer to family. Others are ready to downsize or trade in an older place for something newer and easier to maintain and navigate, like a single-story home. Some want to lower their monthly costs, and let’s be honest, plenty are just looking for a little more sunshine.
Let’s meet Sue. Sue is 73 and just sold her home, walking away with $500,000. She’s eyeing a $600,000 home near her grandkids. But how should she buy it?
Option one: Sue could pay all cash. That would drain her home sale proceeds and require dipping into her savings, leaving her with little financial flexibility in the future.
Option two: She could take out a 30-year traditional mortgage. That would preserve more cash upfront but cost over $3,100 a month and more than $1.2 million over 30 years, at which point Sue would be 103.
Option three: H4P. With about $385,000 down, Sue can buy the home, keep her savings liquid, and avoid making monthly mortgage payments. She’ll still pay her property taxes and insurance, but she’ll enjoy the flexibility and peace of mind that come with the retirement lifestyle she’s worked for.
H4P isn’t just good for your clients. It’s a win for your business too. It will help you stand out from the crowd and give your buyers more buying power to land the home they really want and make deals smoother, since the loan is usually easier to qualify for than a traditional mortgage. Baby boomers are eager to buy, given the right opportunity, and with an H4P, you can help them buy better with more freedom, more flexibility, and more satisfied clients.
To learn more about H4P loans, contact your Fairway Reverse mortgage specialist today.
