Reverse Mortgage for Purchase

Posted on August 3, 2009. Filed under: Reverse | Tags: , , |

 Senior Living

What is the Home Equity Conversion Mortgage (HECM) for purchase?

  • An FHA-insured reverse mortgage.
  • Enables senior homebuyers, age 62 or older, to purchase a new primary residence and obtain a reverse mortgage in simultaneous transactions with no monthly mortgage payments
  • Allows buyers to combine reverse mortgage proceeds with a down payment from their current home sale or other assets, to purchase a new home.

The amount of reverse mortgage proceeds (and the resulting amount of down payment required) is determined by the age of the borrower and the value of the home to be purchased.  It is reasonable to assume you will need to make a large enough down payment to create approximately 40-50% equity in the new property for this to work.

It was difficult to find interest in a product like this during our recent cycle of  economic growth that created surging real estate values and home equity.  Current events have altered that reality, creating the appropriate scenario for the Reverse for Purchase to make sense for many.  

Seniors that need to downsize to a home that is easier to maintain, those that have seen savings decrease during recent economic turmoil, and those that would benefit from having no mortgage payment (using cash flow for other expenses or savings) should consider the Reverse for Purchase as an option.

Example scenario – A couple, both 74 years of age, want to purchase a smaller home with less maintenance.   The purchase price is $300,000.  They would qualify for Reverse Mortgage proceeds of approximately $198,080.  $300,000 – $198,080 = $101,920 of cash required to close.   They would use the funds from the sale of their current home or other assets to satisfy this cash required and they would have no mortgage payment.

Straight forward and nuetral information about pros and cons of reverse mortgages can be found with AARP, located here

Please contact me for more specific details about this product or a particular purchase scenario.



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