The Home Equity Conversion Mortgage (HECM) for Purchase, also known as the Reverse Mortgage Purchase, was created by the U.S. Congress to streamline the home buying process and reduce the cost of obtaining a loan. Previous to the creation of the product, when a senior would buy a new home and then follow up in taking out a Reverse Mortgage, they would incur closing costs for both loans. The Reverse Mortgage for purchase eliminates the two-step process and completes the transaction with one set of closing costs rather than two.
The basics when buying a new home with a Reverse Mortgage:
- The home must become your primary residence.
- You must be 62 years of age or older to qualify.
- Monthly mortgage payments are not made while living in the home, but the principal amount and accrued interest are due when you sell, move out for 12 months or longer, or pass away.
- You will get a fixed or variable rate of interest, and a lump-sum is advanced to purchase the new home.
- Down payments are required since a Reverse Mortgage is based on equity in a home. The down payment creates that equity. Many use the proceeds from the sale of their previous home or funds from savings as their down payment. Down payments cannot be borrowed.
- The homeowner must continue to pay the property taxes, homeowners insurance, and maintain the home in good condition.
Interested in buying a home closer to your family? Or maybe you’re considering incorporating a Reverse Mortgage into your overall retirement strategy. As Reverse Mortgage specialists, we’d be happy to answer all of your questions about Reverse Mortgages – just give us a call!