A reverse mortgage is a loan that lets homeowners age 62 or older tap into their home equity without selling their house or adding to their monthly expenses. While reverse mortgages are often used to cover basic living expenses and medical bills, it’s possible to use an HECM for Purchase to buy a new home. An HECM for Purchase is a type of re൲verse mortgage issued by the Fඣederal Housing Administration’s (FHA) that allows you to receive a line of credit, fixed monthly payments, or a combination.

Here’s a quick look at hoᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚw an HECM for Purchase reverse mortgage works.

What Is a Reverse Mortgage?

After diligently paying down your mortgage for years (or decades), much of your net worth could be tied up in your home’s value. This can be a tricky financial situation for older adults trying to pay for every💜day living ex𓆏penses,ไ medical bills, home repairs, or anything else. 

However, homeowners age 62 or older can convert some of that 澳洲幸运5官方开奖结果体彩网:home equity into cash using a 澳洲幸运5官方开奖结果体彩网:reverse mortgage. Instead of making payments to a lender, the lender pays you based on the equity that you’ve built in your home. Over the life of the loan, your debt increases while your home equity decreases. Eventually—when you sell, move, or die—the home’s sale proceeds are used to pay off the loan.

What Is an HECM?

A 澳洲幸运5官方开奖结果体彩网:ho🌌me equity conversion 🐟mortgage (HECM) is a reverse mortgage program insured by the 澳洲幸运5官方开奖结果体彩网:Federal Hous🅰ing Administration (FHA♓) and available through FHA-approved lenders.

HECMs represent the bulk of reverse mortgages that lenders offer on homes valued up to $1,149,825—above that, and youꦑ’ll need a proprietary or ju𓆏mbo reverse mortgage.

What Is an HECM for Purchase?

An HECM for Purchase is a home equity conversion mortgage you can use to buy a home. Like standard HECMs, the 62-and-up age restriction applies, and you don’t have to repay the loan until you sell the home, move out, pass away, or fail to meet the loan obligations (e.g., fall behind on your 澳洲幸运5官方开奖结果体彩网:property taxes or 澳洲幸运5官方开奖结果体彩网:homeowners insurance).

HECM for Purchase closing costs are higher than other reverse mortgage loans. They include an up-front 澳洲幸运5官方开奖结果体彩网:mortgage insurance premium equal to 2% of the property’s value, plus various lender and third-party costs like loan 澳洲幸运5官方开奖结果体彩网:origination fees, 澳洲幸运5官方开奖结果体彩网:title insurance, 澳洲幸运5官方开奖结果体彩网:appraisal fees, 澳洲幸运5官方开奖结果体彩网:credit report fees, and 澳洲幸运5官方开奖结果体彩网:recording fees.

Unlike a regular HECM, you’ll also need cash on hand to cover a sizable 澳洲幸运5官方开奖结果体彩网:down payment. Overall, your up-front costs could run from 29% to 63% of the home’s purchase price, depending on your age.

The funds can come from your savings or the sale of your previous home or personal assets (e.g., stocks)—but you can’t use “gap financing” or other types of interim financing like a credit card cash advance or 澳洲幸运5官方开奖结果体彩网:seller financing.   

Here are some examples showing the required minimum down payment for an HECM for Purchase loan, according to the National Reverse Mortgage Lenders Association:

HECM for Purchase Eligible Properties

Any home you buy with an HECM for Purchase must meet FHA property standards and flood requirements. Eligible property types include:

• Single-family homes (one- to four-unit properties)
• Manufactured homes (built after June 1976)
• Condominiums
• Properties in 澳洲幸运5官方开奖结果体彩网:planned unit developments (PUDs)
• Townhouses
• New-construction homes with a certificate of occupancy (CO) issued by closing

The Bottom Line

Reverse mortgages—including HECM for Purchase loans—澳洲幸运5官方开奖结果体彩网:involve substantial costs, making them a poor choice for many older adults. Some less expensive options include mortgage r꧃efinancing, 澳洲幸运5官方开奖结果体彩网:home equity loans, or 澳洲幸运5官方开奖结果体彩网:downsi🍸z𒆙ing and pocketing the extra proceeds.  

Still, if you decide that a reverse mortgage makes financial sense for you, shop around to compare costs. Mortgage insurance premiums are generally the same across 澳洲幸运5官方开奖结果体彩网:mortgage lenders, but expenses like loan origination fees, closing costs, servicing fees, and interest rates tend to vary.