Reverse Purchase Mortgage

Reverse Purchase Mortgage

A Reverse Purchase Mortgage loan is a unique type of FHA-insured purchase mortgage loan. While many senior citizens choose the option of a reverse mortgage, some senior citizens choose a Reverse Purchase Mortgage loan. This type of loan allows the home owner to access the equity in their home. However, recent changes will now allow a senior citizen to use this loan for a future home purchase.

Home Equity Conversion Mortgage (HECM)

The Home Equity Conversion Mortgage (HECM) also targets the senior citizen and their age bracket of 62 years and older. This program allows seniors to convert the equity in their home into cash. The amount they are able to borrow with HECM is based on the appraised value of their home and no credit check is necessary. Most seniors are on a budget and the Home Equity Conversion Mortgage program will help to use needed cash that is borrowed against the equity of their home. No payments are due until the home is sold or the borrower passes. At this point, the loan is due in full and must be paid completely.

Reverse Purchase Mortgage

HECM for Purchase

The HECM for purchase program can be used for senior citizens over the age of 62 to purchase a single-family home, a small multi-family home, or a condominium with the proceeds of a Reverse Mortgage. The potential home buyer may want to look into a Fixed Rate-Loan depending on the current interest rates. From this program, the current homeowner will have the luxury of having one transaction making it easier and faster for the homeowner.

Is there a Down Payment Required?

The Home Equity Conversion Mortgage (HECM) will NOT require the potential home buyer to place a down payment on the new home. Like a regular reverse mortgage, the loan amount received is based on the equity of the current home. Keep in mind, there must be equity to cover the accrued interest of the loan amount. The HECM will also require an estimate of 50% of the purchase price in cash. This is a form of a down payment in a sense and will have to be made regardless of how long the borrower plans on remaining in the new home.

HECM for Purchase

HECM Reverse Mortgage

Ways to use a HECM Reverse Mortgage to buy a home are as follows:

  • Pay cash for the new home and then apply for the reverse loan. Some potential home buyers will want to pay cash for the home and then apply for the reverse loan to replenish the money they have spent on the new home.
  • Buy the home with a forward loan, then apply for the reverse loan and pay back the money.
  • Buy the home with the HECM program. Some seniors may want to choose this option because it is a one-time payment and transaction. Potential home buyers will apply for the reverse purchase loan and use the money from the current home to buy a new one, whether it be because they want to downsize or move out of state.
Reverse Mortgage
 
 
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