You’ve probably heard about a reverse mortgage as a special type of loan that retirees can use to help pay off a mortgage or increase cash flow during their later years.
A reverse mortgage can be a safe financial alternative to selling the home in which you live and moving away from family and friends, if it’s staying in your home you are trying to achieve.
Or, if it is a move you are seeking, whether to a milder climate, or to relocate closer to family that has moved away over time, a reverse mortgage can actually help you achieve this too.
Utilizing a special type of reverse mortgage—the Reverse Mortgage for Purchase—you can accomplish both a move to a new home plus the benefits a reverse mortgage offers, all within a single transaction.
How does it work?
The Home Equity Conversion Mortgage (HECM) for Purchase is loan insured by the Federal Housing Administration.
It allows you to purchase a home and take out a reverse mortgage within a single transaction, cutting down on closing costs and other fees associated with both taking out a reverse mortgage and purchasing a home.
How do I qualify?
Qualifying for a HECM for purchase is the same as qualifying for any HECM loan: you must be at least 62 years of age. In the case of a HECM for Purchase, you must have enough home cash as a down payment to put into the purchase of a new home.
Unlike “forward” loans, you do not need to meet income or credit requirements in order to get a reverse mortgage.
How much home can I afford?
The value of your current home or the amount of cash you have available will determine the amount for which you are able to qualify to purchase. You can use our reverse mortgage purchase calculator to get an estimate for how this loan will apply to your individual situation.
Where can I buy?
You can use a HECM for purchase in any state except Texas. Due to homestead laws in Texas, the state does not currently allow for this type of reverse mortgage. However, state legislators have approved an amendment to its constitution, which would make the loans available. Residents of Texas will vote on the amendment in November 2013.
***Article Update: Texas has recently approved Reverse Mortgages for Purchase!
If you are considering a move using a reverse mortgage, you will want to consider tax benefits as they apply to retirees in your state as well as cost of living in your retirement community. Some states have more benefits than others. U.S. News recently rated the best places to retire for under $40,000 per year.
Can I purchase a home under construction with a reverse mortgage?
Possibly. You may purchase a newly built home with a HECM for Purchase as long as it has been granted a Certificate of Occupancy. Your real estate agent should be able to tell you whether this certificate has been given by your local authorities, and whether you can move forward on the purchase through a HECM for Purchase.
Read more about the HECM Purchase for New Construction Here
How does the loan improve cash flow?
Depending on the amount of money you bring to the new home purchase and the value price of the home you are buying, you may have funds left over from the reverse mortgage that you can receive in a few different ways.
You can opt to receive monthly payments, essentially boosting your cash flow for ongoing payments you are meeting on a regular basis. You may also opt to keep the proceeds of the loan in a line of credit, should you choose to draw on it in the future.
The reverse mortgage can boost the buying power for retirees by allowing for the elimination of mortgage payments while also leaving some proceeds for home repairs or upgrades. Some retirees choose to purchase newly constructed homes, with the reverse mortgage allowing for certain customized options geared toward aging such as wider doorways, wheelchair ramps or simply moving to a single-story home.
Where can I find out more?
All Reverse Mortgage® is eager to answer your questions! If you are interested the Reverse Mortgage for Purchase program and would like to speak with an expert please call us Toll Free (800) 565-1722 or request a quote by clicking here »
Additional HECM Purchase Resources at reverse.mortgage:
Listen in on YouTube: “Yes, You Can Purchase With a Reverse Mortgage”