HECM For Purchase
A HECM for Purchase Loan, also known as a Reverse for Purchase, is a government-insured loan that gives homeowners 62 and older the convenience and flexibility to purchase a new home while eliminating mortgage payments. You make a down payment and let your HECM for Purchase loan cover the rest.
*Proprietary reverse mortgages are also available to purchase homes up to $10 million dollars.
What is HECM for Purchase?
The HECM reverse mortgage for purchase product is a Federal Housing Administration (FHA) insured hecm reverse mortgage that allows seniors to use the equity from the sale of a previous residence to buy their next primary home in one transaction. Regardless of how long you live in your single family home, condominium, multifamily or manufactured home, or what happens to your home’s value, you only make one, initial investment (down payment) towards the purchase, unlike a traditional mortgage.
Why Consider the Loan?
No matter what your needs may be, this may help you:
• Eliminate monthly mortgage payments while you live in the home - You cannot lose your home under normal circumstances and so long as you pay your property taxes, homeowner’s insurance, maintenance costs and otherwise comply with the loan terms.
• Increase your purchasing power - Use the funds from a reverse mortgage to purchase “more home” and improve your cashflow.
• Pay less upfront investment
• Right size to a smaller, lower maintenance home - Move closer to family and friends or match your lifestyle needs with a lower-maintenance home.
• Use the loan proceeds to purchase a home closer to family or friends
• Lower your cost of living during retirement
• Enjoy carefree living in a senior housing community
Your closing costs and interest rates are at historical lows and loan amounts on loan balances on a primary residence can be at historical highs.
If your spouse is under age 62, she can be an eligible non borrowing spouse and remain in your home for life.
For eligibility considerations, see our In-Depth Information.
To find out how much you will be eligible to receive towards your purchase price on a HECM for purchase loan, give us a call or simply fill out your request on our Custom Proposal page.
Note: Proprietary-Jumbo-Reverse loans are also available for purchases of single and multi-family homes and condominiums with a higher sale price from $800,000 to $10 million. Non-FHA approved condominiums are also eligible.
Selling a previous home and purchasing a home in the same calendar year will benefit for favorable tax considerations.
What safeguards are in place?
The HECM reverse mortgage product has been improved over the years so that it can better meet the needs of older Americans. Today, there are important safeguards in place to ensure that it can continue to help consumers like you for years to come.
You must complete reverse mortgage counseling with an independent counseling agency.
You must undergo a financial assessment to ensure you are able to meet the financial obligations of the loan, which includes the ability to pay your property taxes and homeowners insurance.
If your spouse is younger than 62, they can qualify as an eligible non-borrowing spouse and remain in the home even if you leave or pass away, so long as they continue to meet all loan obligations. (Borrower must continue to pay for property taxes, homeowner’s insurance and maintain the home.)
What’s different about HECM for Purchase versus a traditional mortgage?
• HECM for Purchase: Exclusively for home buyers age 62+.
• Traditional mortgage: No age restriction (except being legal age to enter a contract).
• HECM for Purchase: Flexible repayment feature — The borrower can choose to repay as much or as little as they like each month, or make no monthly principal and interest payments. The flexible repayment feature makes it easier for a buyer to afford the home they really want, preserve more savings and retirement assets, and improve cash flow. As with any mortgage, the borrower must keep current with property-related taxes, insurance and maintenance as part of their ongoing loan obligations. Repayment is generally required once they sell the home, pass away, move out or fail to meet their loan obligations.
• Traditional mortgage: Monthly principal and interest payment required. Builds equity as the loan is paid down.
Down payment amount
• HECM for Purchase: Required down payment between approximately 45% and 62% of the purchase price, depending on buyer’s age or Eligible Non-Borrowing Spouse’s age, if applicable. (This range assumes closing costs will be financed.) The rest of the funds for purchase come from the HECM loan. This allows the buyers to keep more assets to use as they wish, as compared to paying all cash, while still having the flexibility of no required monthly mortgage payments.
• Traditional mortgage: Typically requires a smaller down payment.
• HECM for Purchase: Single-family homes; FHA-approved condominiums; townhouses or Planned Unit Developments (PUDs); 2-to-4 unit homes that are owner-occupied; and manufactured homes meeting HUD guidelines.
• Traditional mortgage: Single-family homes; condominiums; townhouses or Planned Unit Developments (PUDs); 2-to-4 unit homes that are owner-occupied; manufactured housing; second homes; vacation homes; and investment properties.
Protection against owing more than home is worth
• HECM for Purchase: A Federal Housing Administration (FHA)-insured* program, HECM for Purchase has a non-recourse feature, which means the borrower can never owe more than the home is worth when the loan is repaid. The home is the only source of repayment regardless of the loan balance at maturity.
• Traditional mortgage: Most do not have a non-recourse feature. Since home values can decline, the borrower could owe more than the home is worth.