HECM For Purchase | Reverse Mortgages

No monthly mortgage payments isn’t the only advantage:

• Compared to paying cash, a HECM allows you to keep more of your savings

• The funds you receive from a HECM are not taxable income

• You own your home, with full title and control of the property

• It may be easier to qualify for than for a traditional mortgage

• No repayment is required until the last borrower no longer lives in the home

Too good to be true?

Or an opportunity too good to pass up?

Are you a homeowner age 62 or older? If you’d like a home that’s

closer to your family; one that’s more physically accessible; or one

that’s rightsized for your needs now or in the future, a Home Equity

Conversion Mortgage (HECM)—also known as a reverse mortgage—

may be a great solution.

Unlike a traditional (forward) mortgage—where the borrower receives

money and is obligated to start repaying the loan right away—money

you receive through a HECM allows you to purchase a new home

without having to make monthly mortgage payments.* The loan is

due only after the final borrower no longer lives in the home.

Here’s an example: Rich, 71 years old, wants to downsize and eliminate

his monthly mortgage payments. The purchase price of his next home

is $350,000. Using the proceeds from the sale of his current home,

Rich can provide a cash down payment of approximately $181,500 and

use a HECM loan to cover the remaining cost of approximately $168,500.

Through a reverse mortgage, Rich can purchase the new home and

improve his monthly cash flow by eliminating monthly mortgage

payments. He might even decide that he could afford some upgrades

to make his next home his dream home.

*You pay property taxes, insurance, utilities, and home maintenance costs.

HOW DOES A HECM FOR PURCHASE WORK?

If you qualify, you can buy a home by taking out a HECM reverse mortgage on the property:

• Using funds from the sale of your current home or cash you have on hand, you can make

a down payment of about 29% to 63% of the purchase price (assuming that closing costs are

financed), depending on your age.

• The balance of the purchase is covered by your HECM proceeds—any remaining funds can

be used as you wish.

• There’s only one closing—the home purchase and HECM reverse mortgage are done at once.

• You make no monthly mortgage payments on the new home.

• You—not the bank—own the home and can continue to live in it,

as long as you continue to pay property taxes, insurance, utilities,

and home maintenance costs.

• The loan is repaid, including principal plus accrued fees and interest,

when the last surviving homeowner no longer lives in the home.

How is a HECM for Purchase different than

a traditional mortgage?

Designed for you. Only homeowners age 62 and older can get a

HECM for Purchase.

Flexible payment options. A traditional mortgage requires monthly payments.

With a HECM loan, you can pay as much or as little as you like each month—or make

no monthly mortgage payments at all.

Keep more cash every month. A HECM requires a down payment of about 29% to 63%

of the purchase price, depending on your age. A traditional mortgage typically requires

a smaller down payment, but doesn’t have a no-monthly mortgage payment option.

Protection. HECM loans are FHA insured and have a non-recourse feature—meaning

you can never owe more than the home is worth. Traditional mortgages do not

have this protection.

A Home Equity Conversion Mortgage for Purchase, or HECM for Purchase, is a type of reverse mortgage that allows seniors to buy a new home while also obtaining a reverse mortgage in one transaction. This type of mortgage is specifically designed for seniors who are 62 years or older and allows them to purchase a home without having to make monthly mortgage payments.

Here's how it works: the HECM for Purchase is a reverse mortgage that allows seniors to use the equity in their home to buy a new home, while also receiving a reverse mortgage loan. The loan is based on the equity in the home and is paid out in a lump sum or through monthly payments. The borrower is not required to make monthly mortgage payments, but they are still responsible for paying property taxes, insurance, and maintaining the home.

One of the main benefits of a HECM for Purchase is that it allows seniors to downsize or relocate without having to sell their current home. This can be especially useful for seniors who may not have the financial resources to cover the costs of selling their current home and buying a new one.

Another benefit of a HECM for Purchase is that it can allow seniors to purchase a home that is better suited to their needs, such as a home that is more accessible or closer to family and friends. It can also allow seniors to purchase a home in a community that has amenities and services that are important to them, such as a community center or swimming pool.

To qualify for a HECM for Purchase, borrowers must be 62 years or older and must meet certain financial and credit requirements. They must also have sufficient equity in their current home or have the financial resources to make a down payment on a new home.

One thing to keep in mind with a HECM for Purchase is that the loan must be paid back when the borrower no longer occupies the home as their primary residence, such as when they sell the home or pass away. The loan is typically paid back from the sale of the home, but if the sale proceeds are not enough to cover the loan, the borrower's heirs are responsible for paying back the remaining balance.

It's important for seniors to carefully consider all of their options before deciding to pursue a HECM for Purchase. While it can be a helpful financial tool for some seniors, it may not be the best option for everyone. Seniors should speak with a financial advisor or a reverse mortgage counselor to determine if a HECM for Purchase is right for them.

If you're a senior considering a HECM for Purchase, here are a few things to keep in mind:

Understand the costs: As with any mortgage, there are costs associated with a HECM for Purchase. These costs may include closing costs, origination fees, mortgage insurance premiums, and other fees. It's important to carefully consider these costs and how they may affect your financial situation.
Know your options: There are different types of HECM for Purchase loans available, so it's important to understand the differences between them and how they may affect your financial situation. Some options to consider include the HECM Standard, HECM Saver, and HECM for Purchase.
Consider the impact on your heirs: It's important to consider how a HECM for Purchase may affect your heirs. If the loan is not paid back in full when the borrower no longer occupies the home, the borrower's heirs may be responsible for paying back the remaining balance.
Speak with a financial advisor: It's always a good idea to speak with a financial advisor or a reverse mortgage counselor before making any financial decisions. They can help you understand the pros and cons of a HECM for Purchase.