HECM Purchase: Down Payment, Rates & Limits

October 12, 2019 By Michael G. Branson 44 comments

Did you know that a reverse mortgage can be used to purchase a new home?

It sure can, in a process called a Home Equity Conversion Mortgage Purchase. (HECM Purchase)

Basically, a new home is bought at the same time a reverse mortgage is taken, and the transaction is rolled into one.

The reverse mortgage for home purchase is an option for seniors who want to relocate, either to be closer to family, to downsize, or move to a home that better meets their needs—a home without stairs, for example—at the same time as converting home equity into cash.

In order to qualify for a reverse mortgage purchase, however, the down payment on the new property must be covered either by the sale of the previous home or through savings or other means.

Down Payment is based on:

Age of youngest borrower
Current interest rates
Sales price or maximum lending limit of $765,650

HECM Purchase Down Payment by Age

Purchase Price $300,000 $400,000 $500,000 $600,000 $700,000

Age Down Payment Down Payment Down Payment Down Payment Down Payment

62 -$154,496.49 -$203,601.49 -$252,601.49 -$301,601.49 -$350,601.49

65 -$148,901.49 -$196,001.49 -$243,101.49 -$290,201.49 -$337,301.49

70 -$138,701.49 -$182,401.49 -$226,101.49 -$269,801.49 -$313,501.49

75 -$129,401.49 -$170,001.49 -$210,601.49 -$251,201.49 -$291,801.49

80 -$118,601.49 -$155,601.49 -$192,601.49 -$229,601.49 -$266,601.49

85 -$105,401.49 -$138,001.49 -$170,601.49 -$203,201.49 -$235,801.49

90 -$91,601.49 -$119,601.49 -$147,601.49 -$175,601.49 -$203,601.49

*Not an offer to lend. Down payment examples are approximate and include most necessary closing costs such as 2% upfront mortgage insurance & 3rd party closing costs.

Interest rate used to arrive at down payment percentages 2.84% (12-Mo Annual Libor 2.375% Margin) as of 07/23/2020.

Request a free ARLO quote for exact down payment and costs associated with the state you are purchasing in as some states charge additional state specific taxes associated with purchase loans.

Purchase Price	$300,000	$400,000	$500,000	$600,000	$700,000
Age	Down Payment	Down Payment	Down Payment	Down Payment	Down Payment
62	-$154,496.49	-$203,601.49	-$252,601.49	-$301,601.49	-$350,601.49
65	-$148,901.49	-$196,001.49	-$243,101.49	-$290,201.49	-$337,301.49
70	-$138,701.49	-$182,401.49	-$226,101.49	-$269,801.49	-$313,501.49
75	-$129,401.49	-$170,001.49	-$210,601.49	-$251,201.49	-$291,801.49
80	-$118,601.49	-$155,601.49	-$192,601.49	-$229,601.49	-$266,601.49
85	-$105,401.49	-$138,001.49	-$170,601.49	-$203,201.49	-$235,801.49
90	-$91,601.49	-$119,601.49	-$147,601.49	-$175,601.49	-$203,601.49

Allowable Down Payment Sources:

Cash on hand (Savings, 401k, etc.)
Proceeds from sale of home
Gift from family

Proceeds from the sale of the previous home and savings are the most common ways for borrowers to meet the down payment requirement.

There are other acceptable sources of funding under the Federal Housing Administration, which is the insurer for the loan.

Those that are NOT acceptable include sweat equity, trade equity, rent credit and cash (or equivalent) from someone benefiting from the reverse mortgage transaction or a third party that is reimbursed by someone benefiting from it.

Cash advances from credit cards are also not accepted.

For sources that will work to finance the equity portion of the loan, borrowers can use an earnest money deposit or a withdrawal from a savings or checking account or retirement fund.

Some forms of gift money are also OK, including gifts from family members, employers, a charity or government organization with an interest in home ownership initiatives, or a close friend who has a documented interest in the borrower.

Gifts from anyone involved in the transaction in any way are not acceptable.

Other, less common sources of funding can also be used, such as collateralized loans, savings bonds, employer assistance programs, and other means.

Current Reverse Mortgage Purchase Rates

Lending Limit Fixed Rate Adjustable Rate

$726,525 3.06% 2.84%

$4,000,000 5.99% 5.50%

Example calculation using fixed rate:
3.06% + .50% Monthly MIP = 3.56% in total interest charges. Fixed Rate APR calculated assumes $250,000 loan amount and includes .50% Mortgage Insurance and standard 3rd party closing costs.

Lending Limit	Fixed Rate	Adjustable Rate
$726,525	3.06%	2.84%
$4,000,000	5.99%	5.50%

Eligible Property Types:

Single family homes
PUD – planned unit development
2-4 unit dwelling
HUD approved condominiums

Most property types can be used in a reverse mortgage for purchase, with several exceptions.

The home must not be under construction, and must be habitable.

Co-ops, boarding houses, B&B’s and newly constructed homes where a Certificate of Occupancy has not been issued are ineligible.

Certain types of manufactured homes also may not be used.

Those built before 1976 and those built since then but failing to comply with Department of Housing and Urban Development standards won’t fit the bill for a Purchase reverse mortgage.

Amount Available

The amount that can be borrowed is dependent on age and home value.

It’s best to check with a lender on the amount that will be required as a down payment and whether sources of funding will be needed in addition to the proceeds of the previous home sale.

For those who do qualify, the reverse mortgage purchase can be used as a tool toward funding retirement in addition to moving to a new home that is more suitable for aging in place.

Tip: Calculate your down payment, current rates and more with ARLO Purchase Calculator

Top FAQs

Can you get a reverse mortgage on a purchase?

Yes. The reverse mortgage has been available for purchase transactions since 2008. FHA implemented this to eliminate the need for borrowers interested in buying a new home from having to do two transactions.

How does a reverse mortgage purchase work?

A reverse mortgage for purchase works very similar to a standard reverse mortgage. The loan amount calculations are the same as a regular reverse in that it uses the age of the youngest borrower/spouse and the interest rate to determine the loan to value that can be borrowed of the purchase price or home value (whichever is less). The borrower then brings in funds at closing to cover the difference.

How much down payment is required on a reverse mortgage purchase?

The amount of down payment required will depend on the loan to value that the borrower is eligible for. The loan to value is determined by the age of the youngest borrower/spouse and the interest rate. Loan to values for a 62-year-old start around 50% or so and can go as high as 75% for a 92+ year old.

How is a reverse mortgage purchase different than a traditional loan purchase?

A reverse mortgage purchase differs from a traditional loan purchase in a couple areas. A reverse mortgage loan will require a larger down payment in most instances than traditional loans that can go as high as 95% loan to value. Additionally, a reverse mortgage purchase follows FHA guidelines that has more regulations related to fees allowed to be paid by the seller and concessions from the seller.

Recommended Articles:

Purchase Reverse Mortgage FAQs
Here’s an Ideal Reverse Mortgage Purchase Example
Using a Reverse Mortgage Purchase for New Construction
Read about our own HECM Purchase client success story in Kiplinger’s Retirement Report

Post Tags: hecm purchase reverse mortgage purchase

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About the Author, Michael G. Branson

Michael G. Branson (CEO All Reverse Mortgage Inc. and moderator of ARLO™) has 40 years of experience in the mortgage banking industry and has devoted the past 15 years to reverse mortgages exclusively. Michael G. Branson was part of the team that introduced the first fixed-rate jumbo reverse mortgage to market, which was sold to a private investor in 2007.

44 Comments on this Article

I'm ARLO™ and I love responding to your questions and comments. Let's talk!

Mark
June 15th, 2020

My parents are 75 years old. They bought a new home last year, which they financed with a Fannie-backed mortgage. but the location no longer works for them and they need to move again. They would like to rent their current home and they have a renter lined up. For their new primary residence, they would like to use a reverse mortgage HECM to purchase it sine rates are so low. They have enough saved for a down payment. Would they be able to buy their new primary residence with a reverse mortgage?
Reply to Mark
- ARLO™
  June 15th, 2020
  
  Hello Mark,
  
  If they qualify under the HUD financial assessment guidelines, use they can. The underwriter will look at the occupancy to be sure it makes sense that they would occupy the new property as their primary residence but if it makes sense and they qualify, there should be no issues.
  Reply to ARLO
Joan
May 26th, 2020

Hello ARLO,

I am a healthy and active eighty-year-old renting in Sedona, Arizona, currently paying $1235 per month. My landlord is raising the rent $345.

My monthly income is a little over $2,000, most of which is Social Security and a federal pension annuity, plus money from acting and an at-home editing and transcription business.
I have $30,000 in savings, a good credit score and no debt.

I want to learn the maximum I can qualify for with an HECM purchase loan. How do I go about this?
Reply to Joan
- ARLO™
  May 26th, 2020
  
  Hello Joan,
  
  Your income is not a problem. Under the residual income method of qualification that HUD uses, you have ample residual income to qualify for any home as long as you still have about $590.00 per month left to live on after pay all your obligations which include your home costs and any debts.
  Since you have no debts, this would be your taxes, insurance and a 14 cents per square foot utility and maintenance factor for the home (on a 2,000 square foot home that would be $280 per month).
  Even if your taxes were $600 per month, your insurance another $150 per month and your utility/maintenance factor $280 per month, your total obligations would be $1,030 per month giving you just under $1,000 residual income (at $2,000 per month total income) and that would qualify you from an income standpoint because you need $590.00.
  
  Where you will find you have a problem is with the down payment requirement. Because you can live in the home for life with no payments required, the down payment will be higher than it looks like you have available (plus costs). At age 80, the program will lend 64.2% of the home's value.
  Taking a quick look at homes currently listed in Sedona, other than manufactured homes that often do not meet HUD requirements, I do not see any that are currently listed for less than $155,000 which is a small condo and I do not know if the condo project is approved. That would be a down payment of approximately $55,500 plus costs.
  
  If you look at manufactured homes or condominiums, you need to remember there are additional requirements that the properties must meet to be eligible for HUD financing.
  Considering your liquidity is $30,000, you would really need to keep your top purchase price at or below about $57,000 to be able to put down the required down payment of $20,406 and pay the costs associated with the loan and closing the sale.
  You may be able to tweak these numbers if you find a property with a seller willing to pick up some of the closing costs but even then, the price of the home would not rise drastically.
  Reply to ARLO
Wanda M.
May 19th, 2020

Legally blind senior moving from Florida need assistant living facility. She has a reverse on her home. Can she purchase a home in Georgia using reverse mortgage?
Reply to Wanda
- ARLO™
  May 19th, 2020
  
  Hello Wanda,
  
  If she sells her home and pays off the current reverse mortgage with no losses to HUD, then yes, she is eligible for another reverse mortgage on her next home. Not sure how that will work though if you say she needs to move into an assisted living facility.
  To be eligible, she must occupy the property as her primary residence and if she moves into an assisted living facility, the home will not qualify as her primary residence.
  Reply to ARLO
Margaret A.
May 18th, 2020

How can I use a permanent life insurance policy to get the cash necessary for the down payment on HECM for purchase?
Reply to Margaret
- ARLO™
  May 18th, 2020
  
  Hello Margaret,
  
  If you sell the policy or withdraw funds built up and available to you, you would just need to show the terms of the sale or the withdrawal (the paperwork showing that it is money that belongs to you and not borrowed) and the receipt of the funds through the deposit in your account.
  You could not borrow against the policy as you may not use borrowed funds as the source of the down payment.
  Reply to ARLO
Lisa L.
May 15th, 2020

Hi once you do a reverse mortgage with purchase, can you then sell that new house and if so when? Are there time constraints or limitations?
Reply to Lisa
- ARLO™
  May 17th, 2020
  
  Hello Lisa,
  There is never a prepayment penalty and the home is yours, you can do with it as you please. If you sell the home and there is no loss to HUD on the first transaction, you are still eligible for another reverse mortgage on a different property if that is your choice. If HUD was required to pay a claim as a result of your choosing to leave early (which is highly unlikely if you sell soon after you buy), you would not be eligible for another reverse mortgage until the loss was repaid on the first loan.
  Reply to ARLO
Steve M.
January 5th, 2020

My dad recently passed away. My mom because of her age was not put on the title. Because of finances she is gonna have to sell the home. The house has about $15,000 equity. How does she figure if she will get any of it?
Reply to Steve
- ARLO™
  January 9th, 2020
  
  If she is the owner of the property now, she needs to sell the home and repay the outstanding loan. Everything above and beyond the loan repayment belongs to her. If she has not transferred title yet or your dad did not add her to title before he passed, that is her first priority as she cannot sell a property for which she does not hold title. She might also need to go through probate so she should look into this as soon as possible.
  Reply to ARLO
Sam J.
November 13th, 2019

My wife is considering purchasing a home using the reverse mortgage. I do not wish to participate as an owner and do not wish to be on the loan or the property title. Can my wife use a reverse mortgage as the sole owner of the home?
Reply to Sam
- ARLO™
  November 13th, 2019
  
  Hello Sam,
  
  Assuming you do not live in a state such as Texas where they do not allow a non-borrowing spouse on a reverse mortgage, you can be an eligible non-borrowing spouse on a reverse mortgage purchase and can subsequently become ineligible simply by not meeting the reverse mortgage criteria for spouses but cannot refuse to participate in the loan in any way.
  Since you are married, you would still have to attend the counseling, there are some documents you still would sign and later if you did not occupy, etc. you would become ineligible. You don't even have to be on title at the start but that does not change the counseling and the fact that you start as an eligible non-borrowing spouse to start the loan.
  Reply to ARLO
Lynn
August 25th, 2019

If you are co borrowers and separate and one buys a new house, does the reverse mortgage become due if the other stays in the reverse house? Or when it gets sold?
Reply to Lynn
- ARLO™
  August 25th, 2019
  
  Hello Lynn,
  The loan is still in good standing and not due and payable if at least one original borrower is still living in the property as their primary residence.
  Reply to ARLO
Dianne S.
August 19th, 2019

Looking to buy with reverse mortgage in the $159k range. What percentage will be loaned?
Reply to Dianne
- ARLO™
  August 19th, 2019
  
  Hello Dianne,
  
  That depends on a few factors including interest rates and the youngest borrower's age. What I can tell you though is that with the recent downturn in rates, now is a great time to be buying!
  You can receive the maximum amount with the reverse mortgage available under the program at this time as the rates have fallen below the "floor", meaning borrowers are not currently losing a portion of their available proceeds due to higher rates. To know exactly what you can expect to receive based on your parameters, you should visit our H4P calculator.
  You can see what the real time costs are in your area and also what programs are available to you without any hassle or any obligation (keep in mind with a purchase, you and the seller choose the service providers for closing, title, etc. so the fees may vary a little and we have no way of knowing all the fees for every provider you may choose, but they will be close).
  Reply to ARLO
C. Tiep
May 29th, 2019

This is a lot to process, since we are considering a HECM for purchase, I would like to know the cost of the mortgage insurance premium. I assume it is a per 100K or something similar.
Reply to C.
- ARLO™
  May 29th, 2019
  
  Like most insurance policies, the Mortgage Insurance Premium (MIP) has two components. The Up-Front MIP, or UFMIP, is 2% of the property value or the HUD maximum lending limit, whichever is less. The current HUD maximum value is $765,600. Borrowers whose property value exceeds this limit are still capped at the same UFMIP as borrowers who have a value of $765,600 on the HUD program and borrowers whose property values are less would pay 2% of the actual value.
  The annual renewal is determined by the outstanding loan balance and it is .5% of the outstanding loan balance. This means that since borrowers who borrower more money and carry a larger balance are a higher risk, their annual renewal will be higher than borrowers who carry a smaller balance since the renewal is determined as a percentage of the balance owed.
  Reply to ARLO
Peter G.
May 6th, 2019

Can we purchase a home using a reverse mortgage? We are looking to buy one, and do not have a existing mortgage.
Reply to Peter
- ARLO™
  May 6th, 2019
  
  Hi Peter,
  
  Yes, you can purchase using a reverse mortgage. If you are saying that you own a home now and have no mortgage and intend to keep that home, you need to know that the new home must be your primary residence and you would have to qualify with the expenses of both homes.
  The lender would want to see that there is a good reason for the new home purchase and that the intended occupancy is well-documented and that it is not a second home or a non-owner-occupied property, otherwise it would not qualify. If you are selling your current home, that would not be an issue.
  If you would like to see what you can qualify for in your chosen area, simply go to our online purchase calculator to check out the costs and all the information for your circumstances in real time!
  Reply to ARLO
Joe
April 28th, 2019

I am 70 years old; I would like to purchase a condo for $220,000 and do a reverse mortgage at the same time. The building is not FHA approved so I don't qualify for a HECM reverse mortgage. I had planned on paying 5% down and finance with MIP. What would it take to purchase with a reverse mortgage? Is there a certain amount of equity needed to qualify for a reverse mortgage? If I pay $50,000 down to have equity, how much if any would I get back after completing the reverse mortgage process?
Reply to Joe
- ARLO™
  April 28th, 2019
  
  Hello Joe,
  
  A reverse mortgage will only give you about half the value of the home so you would have to have more than $100,000 to be able to purchase with a reverse mortgage. Because you never have to make a payment while living there, the reverse mortgage requires a substantial down payment. The project would also have to be HUD/FHA approved in order to be eligible, I am not aware of any proprietary reverse mortgage that would accept a condo at that value currently that is not in a HUD approved project.
  Reply to ARLO
Logan
April 24th, 2019

My friend a d I purchased a home together using the HECM Reverse Mortgage for purchase loan. 2 yes later she wants out, but I don't. What would be the options?
Reply to Logan
- ARLO™
  April 24th, 2019
  
  Hello Logan,
  You have the same options as with any other loan. If at least one original borrower remains in the home, the loan is fine, so you just need to determine how the two of you wish to proceed. If she has cash in the transaction and wants to be repaid, that might be tough for you to repay her if you don't have the funds available.
  You both also must understand that if this loan remains open, she is not eligible for another reverse mortgage. You can look into refinancing the existing mortgage with a new loan in just your name to release her completely, but that does not eliminate and need to repay her if you owe her for initial down payment participation (minus any her portion of interest that accrued while she lived in the home and plus any appreciation that would be her portion I assume).
  If you have no other options, a sale of the property may be your only option which would require you to seek another property for which you could qualify on your own. You could once again use a reverse mortgage at that time since the first would be repaid with no losses.
  Reply to ARLO
Mary
March 4th, 2019

How much is the down payment using a reverse mortgage purchase on $500,000 property?
Reply to Mary
- ARLO™
  March 4th, 2019
  
  Hi Mary,
  
  That depends on a few issues. The youngest borrower's age, the location of the property and the costs in the area will have a big effect on those numbers. Fortunately, though, we would be very happy to go over those numbers with you or we have an online calculator that will give you real-time numbers based on your information.
  Reply to ARLO
Kay
August 11th, 2013

Just wondering,

My grandma is the last one alive. My dad and his siblings And gpa have all passed.
She has property with a reverse mort.
My cousins are trying to squeeze her, but i dont want to pry and ask her if they can get the property? Cause they sure dont act like they know. Anyway, i dont want the property- its a lot to maintain and i dont like my hometown. But id like to know if it can be bought?

thanks
Reply to Kay
- ARLO™
  August 14th, 2013
  
  Hi Kay,
  The property always belongs to your Grandmother. When she passes, then the title will pass in accordance with whatever provisions she has put into place. Whoever is her heir(s) and receives the property, will have the option of paying off the loan and keeping the property, selling it and keeping the equity or if there is no equity remaining, they may elect to let the lender sell it and they will have no further liability - regardless of how much is owed and how much the property can sell for.
  If the heirs wish to keep the property and the outstanding balance is higher than the property's current value, then the heirs can pay off just 95% of the current market value if that is less than the amount owed and still keep the home. They would not have to "buy it" as you grandmother never lost title to the property as such, her heirs would also already own it.
  Reply to ARLO
Bridget
July 22nd, 2013

Hello I would like to purchase my grandmothers home with reverse mortgage. She has moved into nursing home and will no longer be able to go back into her home. I wanted to be able to keep the home but was told I had to do as an investment property and put 20% down payment. I don't have that type of money but I know I can mortgage the home. It only appraises at $45000. I really hate to see my grandma house foreclosed. She has lived to be 102 and out live what she was hoping to leave to her family. We tried to keep her in home therefore we did reverse mortgage but that money ran out with the cost of someone coming to in take care of her. Any advise on who can help with this? Thanks
Reply to Bridget
- ARLO™
  August 14th, 2013
  
  Hi Bridget,
  I'm not sure I can help with this - your real question is what can you do about financing the home in your name. You don't have to "buy" the house, your grandmother still owns it so it would be up to her to Deed the property to you if that is her desire. From there, the question would just be what type of financing for which you would qualify and what that lender's requirements would be.
  I'm sorry, I don't work with forward loans so I do not know what would be available or for what you should apply, especially if you do not intend to occupy the home but I would encourage you to contact some local lenders and inquire what lending programs they have available. Just remember that you would not be "buying" the home since you do not intend to put a down payment down.
  Reply to ARLO
Jeanne' m. Hurney
May 20th, 2013

All very informative..I am 72 May 1941...I am seeking to purchase a house in Florida..where I live.. I am not clear what process...application..etc I need to proceed..and be ready when I find the house I desire...Do realitors ..selling agents not like to deal with this process?

I had put a deposit on a home...the realitor took another buyer and never responded to our offer....the prop[erty was near me and I followed it...The selling agent would not get back to my realetor.. I've wondered what I need to do to be ready...so my offer is taken seriously.....Can I have an agent process the purchase ........the house bI desire is a neighbor's....We did not get along ....I don't want that issue to cloud the possibility of purchase........I need a home in an area in demand......I have a husband with cancer and am trying to figure this out..Your help would be appreciated..Thank you
Reply to Jeanne'
- ARLO™
  June 4th, 2013
  
  Hi Jeanne,
  This is a lot to cover here so let me just say that you can get a reverse mortgage to purchase a home. Due to the program though, there really isn't a lot of "prequalification" that can be done. We can run your information through the calculator and determine your benefits and can even run credit verify that you have the necessary assets to close the loan, but in the end, so much of the HUD reverse mortgage lending process will also revolve around the property you choose and the program requirements for terms of the purchase, and HUD's program parameters at the time you are ready to proceed, that the prequalification is not really completely possible. Some Realtors are not familiar with the program and so they do not present offers from reverse mortgage buyers in a very good light to sellers. Some sellers shy away from the offers because they simply don't understand the program and people naturally avoid things they don't understand.
  When done correctly, the loans can be closed as quickly as regular forward loans but there are many rules you have to follow that are not typical of forward loans. This does not mean that the loan is not a very good vehicle for seniors to finance the purchase of a home, it just means that there may be a lot of extra education required in the beginning. We have been able to help several buyers simply by talking with prospective selling agents and in more than one case, sellers themselves. One selling agent even became a big proponent of purchase reverse loans after he went through the entire process. You may want to try to get them to learn more about the program and process, it just might help.
  Reply to ARLO
Christine Ballard
February 7th, 2013

Is the top sales price at $625,000? I want to purchase a home in a CCRC and the price is $950,000. I am assuming the appraisal will come in at this amount. This is a full equity purchase. I have the funds for the down payment, but where does the rest of the funds needed to close come from? The difference between the down payment and proceeds to fund the loan do not add up to the price...please explain. It is appreciated. Thanks.
Reply to Christine
- ARLO™
  February 7th, 2013
  
  Hi Christine,
  There is no maximum "sales price". There is only a maximum HUD Lending Limit of $625,500 which means that your benefit amount will be determined from this amount, the appraised value or the sales price, whichever is less. You can buy any value property you wish, but if the home's selling and appraised value is over $625,500 you will not receive any additional benefit on the reverse mortgage than if it was $625,500 and you will have to bring in the difference in cash to close the loan.
  For example, a borrower born on January 1, 1945, purchasing a property for $625,500 would currently receive a principal limit of $407,826.00. From that, you would subtract the HUD Mortgage Insurance Premium, the costs to obtain the loan and the recording costs (which vary around the country) and the borrower would have to bring in approximately $232,545.00 to close the loan and the reverse mortgage would cover the rest. However, if you wanted to buy a home for $950,000, you could certainly do that, but the reverse mortgage benefit would remain the same, $407,826. this means you would have to pay the difference of nearly $325,000 more in cash to close or you would need to put down approximately $557,045 to purchase that home using a reverse mortgage.
  The reason these two amounts don't add up to the $950,000 ($407,826 + 557,045) is because of the fees incurred with the loan. This example was used in a California closing where the closing costs are low. If you were to use a property in Florida or Texas where the title costs and the state costs are higher, these costs could be $5,000 to $7,000 or more higher on a property of this value. But the funds for closing come from you and the reverse mortgage loan.
  Reply to ARLO
Dennis Royer
January 21st, 2013

I want to purchase a new home ($425,000) using a reverse mortgage. I'm 63 and my wife is 45. What happens if I die and she is not 62? What would be required for her to be able to stay in the home since I would have been the only one on the "deed" because of the rules of reverse mortgage purchase. As she would be the benificary to the home at my passing.
Reply to Dennis
- ARLO™
  January 22nd, 2013
  
  The only way you could do a reverse mortgage would be if your spouse was not ever brought on title and this is something we do not recommend lightly. There can be some very high risks associated with this action as well as the fact that many lenders and secondary sources will be eliminating this option completely as of February 1, 2013.
  Because the loan becomes due and payable when the last borrower on the loan permanently leaves the home or passes, if the younger borrower who would not be on title or on the loan is not ready to move when this event occurs and you do not have other provisions in place beforehand to provide for this, it could create extreme hardships on the remaining spouse. This has led to the unplanned displacement of the previously under-aged spouse in many instances. This creates confusion, hardship and has been the start of recent lawsuits from borrowers who truly did not understand the ramifications of such action at the time they first received their reverse mortgages.
  Some provisions borrowers have informed us of that worked for them include an insurance policy that paid the mortgage off when the older borrower passed; a second property that the borrowers owned that the spouse intended to occupy after the passing of the older borrower anyway; and also the plans that the younger spouse fully intended to move to another state to be with family if and when the older spouse was no longer living anyway. Absent a clear alternative such as one of these, it would be very sad for the spouse of a reverse mortgage borrower to be uprooted from his/her home at the worst possible time if that was not in the plans simply because the loan was now being called due and payable with the passing of the borrower and the remaining borrower did not have the means to refinance the loan in his or her own name at that time. Because the reverse mortgage balance rises with no payments and the accrual of interest, it would only get harder for the previously under aged spouse to refinance the loan later in her own name.
  You are correct, she would own the home at the time being your heir, but that would not help her very much if she did not have the means to refinance the home in her own name at that time of your passing. If there was very little or no equity due to a rising balance she might be left looking for a place to live with no nest egg to rely on to help establish her in another location (not to mention another situation like we have just had where housing prices fell sharply). We do not recommend this action for borrowers unless they know the risks and know that they have made provisions such as the ones listed above to protect the under aged spouse.
  Reply to ARLO
Nancy
January 19th, 2013

What are the lifetime rights of one person passes away?
Reply to Nancy
- ARLO™
  January 29th, 2013
  
  Hi Nancy,
  I'm not 100% sure I understand your question but let me take a stab at this. If you are on a reverse mortgage jointly with another individual and one of you passes away, nothing happens to the loan, it remains intact providing at least one of the original borrowers is still living in the property as their primary residence. You can remain in the property for life without having a monthly mortgage payment as long as you abide by the terms of the reverse mortgage (i.e. pay your taxes and insurance and maintain the home, etc). I hope this answers your question but if I did not, please feel free to let me know and I'll be happy to give it another go.
  Reply to ARLO
Joe Gerstein
January 14th, 2013

I am purchasing a new house. I was going to get a conventional mortgage and deposited a lot of money with the builder several months ago to complete the home. The home appraises at $425,000. I gave him $170,000 which he still has most of it. We are living in the house until we get a mortgage. How can I meet the down payment requirements for a reverse mortgage since he has the money?
Reply to Joe
- ARLO™
  January 15th, 2013
  
  Hi Joe,
  The reverse mortgage only requires that you verify the down payment, the transfer of the money and then the source of the funds. If the contract between you and the seller calls for you to deposit $170,000 at the time the contract was signed, you would have to show that you had the funds to deposit that amount at the time you made the deposit, a copy of the cancelled check showing the transfer of the funds and a minimum of three months prior statements to show that the funds were available for three months before they were given to the builder. Depending on your age and benefits under the program, you may need to verify additional funds and they would need to go through the same sourcing routine.
  Reply to ARLO
Jeff
November 26th, 2012

Hi,
I am 71 years old, and I am deciding to buy a new home in Orange county ca. I have 300000
for down for a single family cost about 450000. Can I get 150000 dollars as reverse mortgage? how much interest and other cost. Can I pay interest amount yearly.
Reply to Jeff
- ARLO™
  December 4th, 2012
  
  Hi Jeff,
  Yes to all of the above! And you have several options you can use to do it. You could choose to use a fixed rate, but then you would have to take a full draw of the amount available to you and that would be more than $150,000. However, if you really want a fixed rate mortgage, you could use the fixed rate reverse mortgage and pay back any portion of the funds you did not want at any time without penalty. For example, I don't have your exact date of birth or know your fees so these are estimates, but at 71 years of age, you would be eligible for approximately $301,950 and after the fees, you would have somewhere in the neighborhood of $290,786 paid toward the purchase price with the reverse mortgage leaving you needing to bring in approximately $159,214 (these numbers are approximations in that I do not know if you are 71 but will be 72 within 6 months which would make your benefit amount higher or what your actual closing costs would be).
  But with the fixed rate program, if you did not want to have this high a mortgage and wanted to pay down that amount, you could do so without penalty at any time and yes, you could also pay any amount per year that you wanted to keep your balance down as well after that. You just have to remember that any repayment is credited first to HUD mortgage insurance premiums, any outstanding fees, then to interest and then to principal. The net effect is the same on the amount of interest that you pay as any repayment lowers the amount of interest you pay, but it can effect interest deduction on any repayments.
  Then you can also consider purchasing with an adjustable reverse mortgage and you can use any amount you desire. With the adjustable reverse mortgage, you can take only the amount you want ($150,000), pay the rest of the purchase price yourself and then the remaining portion of the reverse mortgage would be available to you later in a line of credit that you could access at any time. You do not HAVE to borrow the funds ever, but they would be there if you needed them and you do not pay interest on them if you do not borrow them. The line of credit grows on the unused portion so at the end of 10 years, the $138,000+/- line of credit would grow to $225,000+/- so you would have more funds available to you if needs at that time. The costs would vary with the type of loan you chose and you could even lower them significantly by using the Saver program with the line of credit and lower your costs by almost $9,000 up front on the HUD mortgage insurance premium (but you would also have a lower credit line available to you after the close of the loan than outlined above).
  So regardless of your preference, whether you want a fixed rate or an adjustable loan, there is a way to allow you to purchase with a reverse mortgage and accomplish exactly what you are trying to do. I would encourage you to contact us so that we can show you all the scenarios tailored to your parameters.
  Reply to ARLO

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