Reverse Purchase Mortgage

Reverse Purchase Mortgage

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.

Reverse Purchase Loan

HECM Purchase

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.

HECM for Purchase Down Payment

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%.

HECM for Purchase

Ways to Use Reverse Mortgage Purchase

There are several ways you can use the HECM program to buy a new house:

  • Use a forward loan and repay it with a reverse loan. With this option, you get a standard mortgage to buy the home, then repay it with a reverse mortgage. You will need to pay two sets of closing costs.
  • Pay in cash, then get the reverse mortgage. Some seniors prefer to pay for the new home in cash and use an HECM loan to replace their savings.
  • Buy with a reverse purchase loan. Finally, you can choose to buy the new property with an HECM reverse loan which means one set of closing costs. You will need to pay the difference in cash between the loan amount you can receive and the sales price, plus your closing costs.
How to Get a HECM Reverse Mortgage

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