While many retirees have little desire to leave their homes, others may be excited to create new memories somewhere else. The nest is empty, there may be too many stairs, and it may just be time to start a new chapter. A smaller, cozier, and age-appropriate home may seem appealing to many retirees. Let’s take a look at how you can buy a home with a reverse mortgage and how doing this can benefit you.
The HECM for Purchase
Established in 1988, The Home Equity Conversion Mortgage (HECM) for Purchase was created specifically for the benefit of seniors. This reverse mortgage allows persons aged 62 and over to purchase a new principal residence using cash gained for their reverse mortgage.
Most people are not able to buy a home in cash and that’s why mortgages exist. However, a traditional mortgage is usually only accessible to persons within a certain age group. If you’re a retiree and you want to purchase a new home, buying a home with a reverse mortgage may be the most feasible way to do it.
Two Birds, One Stone
Using a reverse mortgage to purchase a new home will allow you to accomplish two goals with one transaction – attain a more fitting principal residence and a reverse mortgage all in one go. This process also helps you to save money because you only pay one set of closing costs. Closing costs can definitely add up to be a hefty expense at the end of the day. Complete two business transactions, for the price of one with a HECM for Purchase.
How Does it Work?
Buying a home with a reverse mortgage takes a few simple steps, let’s take a look at them below:
- Borrowers will provide a down payment from the sale of their previous home or other acquired savings
- Borrowers may meet a loan-to-value ratio requirement with a substantial down payment
- Borrowers must provide verification of personal income and funds
- Equity earned from the down payment and the value of your new home will then be used to calculate your exact reverse mortgage loan amount
- Finally, a portion or all of the reverse mortgage funds will then take care of the remaining costs of the new home, identical to the process of a traditional mortgage
For some retirees, the biggest benefit of buying a home with a reverse mortgage is being able to completely avoid monthly mortgage payments, unlike a traditional mortgage. Using a reverse mortgage to purchase a new home is great for senior borrowers who have a fixed income but would like to attain a new home.
A reverse mortgage is an exceptional choice for retirees looking to own a new home. If you’d like to downsize, move to a new neighborhood, have less space, or have more space, consider purchasing a new home with a reverse mortgage.