Welcome to our Reverse Mortgage Purchase Calculator, designed specifically for seniors considering a new home purchase. With ARLO™, you can quickly access real-time rates and down payment requirements. Our calculator simplifies the process of using a reverse mortgage to purchase your next home, ensuring you have all the necessary information at your fingertips.
Ideal for retirees planning to relocate, family members assisting with housing decisions, or anyone interested in understanding how to leverage a reverse mortgage for purchasing a home, our HECM (Home Equity Conversion Mortgage) calculator is here to guide you through your choices with clarity and precision.
Understanding Our Reverse Mortgage Purchase Calculator: A Step-by-Step Guide
- Input: Enter your age and the new home’s purchase price.
- Estimating Borrowing Amount: The calculator uses this information to estimate how much you can borrow with a reverse mortgage. This amount, combined with your down payment, helps determine the price range of homes you can afford.
- Factors in Calculation: The calculation considers factors like current interest rates, your age (and your spouse’s age, if applicable), and the sale price.
- No Monthly Mortgage Payments: With a reverse mortgage, you don’t have to make monthly mortgage payments. The loan balance is due when you sell the home, move out permanently, or pass away.
- Amortization Schedules: The calculator also shows how much equity you might retain in your new home after getting the reverse mortgage.
Important Notes:
- The calculator provides an estimate. Actual reverse mortgage terms can vary based on individual circumstances and lender policies. Additionally, the seller has the right to choose the title company during the home purchase process, which can impact the final closing costs. It is essential to consult with your lender and real estate professional to understand all potential costs and terms specific to your situation.
- Consider the long-term implications of a reverse mortgage, including the impact on your estate and home equity.
- Consult with a financial advisor or a reverse mortgage counselor before making any decisions.
Benefits of Choosing a Reverse Mortgage to Buy Your Next Home
As people age, many find they need or want to move but face income limitations that make a conventional loan difficult. This often limits their options to an all-cash purchase, narrowing their choices.
Common Reasons for Moving:
- Retirement communities
- Proximity to family or friends
- Homes that meet medical needs or are more accessible
- Single-story homes or homes with smaller lots
A reverse mortgage can help. It allows borrowers to sell their current home and purchase a new one that better suits their needs without monthly mortgage payments. This can be especially helpful for those looking to eliminate monthly payments and reduce maintenance.
With a reverse mortgage, you can finance roughly half the purchase price of your new home (sometimes more or less, depending on the youngest borrower’s age) without a monthly fee. This flexibility enables borrowers to move into a home that meets their current needs or one they can afford.
Navigating Your Down Payment Requirements
Your down payment for a reverse mortgage comes from your savings or the sale of another property. It can be funded through proceeds from real estate sales, personal property sales, or cash on hand, including 401k, stocks, savings, bonds, etc. Gift funds from family are also acceptable.
With a reverse mortgage, you only need to cover part of the purchase price, allowing you to afford a more expensive home without monthly mortgage payments. This flexibility can enable you to buy the home you need, even if it initially seemed out of reach.
HECM Purchase Down Payment Estimates by Age and Home Value
| Age | % Down | $200,000 | $400,000 | $600,000 | $800,000 | $1,00,0000 |
|---|---|---|---|---|---|---|
| 62 | 67.2% | $134,400 | $268,800 | $403,200 | $537,600 | $672,000 |
| 65 | 65.1% | $130,200 | $260,400 | $390,600 | $520,800 | $651,000 |
| 70 | 61.4% | $122,800 | $245,600 | $368,400 | $491,200 | $614,000 |
| 75 | 58.5% | $117,000 | $234,000 | $351,000 | $468,000 | $585,000 |
| 80 | 54.1% | $108,200 | $216,400 | $324,600 | $432,800 | $541,000 |
| 85 | 47.9% | $95,800 | $163,600 | $287,400 | $383,200 | $479,900 |
| 90 | 40.9% | $81,800 | $163,600 | $245,400 | $327,200 | $400,900 |
Frequently Asked Questions
What is a reverse mortgage for a home purchase?
What is the downside of buying a home with a reverse mortgage transaction?
What is the required down payment for a reverse mortgage purchase?
The required down payment depends on several factors:
- Age: The older you are, the more money you can receive as a percentage of the home’s value.
- Property Value: More expensive homes require a higher down payment. Homes valued over the HUD lending limit of $1,149,825 won’t receive additional benefits.
- Interest Rates: Higher interest rates (over 3%) reduce the loan amount you can receive.
- Location: States with higher closing costs (e.g., Florida, Washington, New York, Pennsylvania, New Jersey) will require a higher down payment.
How is a HECM purchase amount calculated?
Is it hard to qualify for a reverse mortgage purchase?
Working with a Realtor?
Please contact us if you’re ready to make an offer on a property and need assistance explaining the reverse mortgage purchase program to Realtors and sellers. We can help clarify how the program works and its benefits for all parties involved.
There are specific requirements for reverse mortgage purchases, so we encourage you to reach out before making your offer. This ensures that you and your real estate professional are fully informed and up-to-date on all requirements in advance.
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