reverse mortgages are a great way for seniors to access the equity they have built into their homes. Thanks to recent legislation, seniors can now use a reverse mortgage loan to buy a home they do not own through a unique FHA-backed home loan.
The Home Equity Conversion Mortgage (HECM) was designed to make it easier and more affordable to seniors to buy a home. Instead of buying a home with a traditional mortgage, paying closing costs and then taking out a reverse mortgage on the home with an additional set of closing costs, the HECM program allows you to combine all of this into a single transaction.
An HECM for purchase mortgage allows a senior at least 62 years of age to buy a new house with the proceeds from a reverse mortgage. The borrower can buy the new property and get the reverse loan in a single transaction to downsize or relocate to a new area. This program may be used to buy a condo, multi-family home, or single-family home.
You are not required to make a down payment to use a HECM for purchase. With a standard reverse mortgage, the amount of the loan will be based on home equity, but there is no equity yet in the home that will be purchased with a reverse purchase loan. This means you will need to pay some amount of the purchase price in cash, usually around 50%.
There are several ways you can use the HECM program to buy a new house: