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 reverse mo♏rtgage issued by the Federal Housing Administration’s (FHA) that allows you to receive a line of credit, fixed mont꧃hly payments, or a combination.

ꦅ Here’s a quick look at how 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 a🅘dults tღrying to pay for everyday living expenses, medical bills, home repairs, or anything else.&🌌nbsp;

However, homeowners age 62 or older can convert some of that 澳洲幸运5开奖号码历史查询:home equity into cash using a 澳洲幸运5开奖号码历史查询: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开奖号码历史查询:home equit𓆏y༺ conversion mortgage (HECM) is a reverse mortgage program insured by the 澳洲幸运5开奖号码꧟历史查询:Federal Housing 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 youܫ’ll🦹 need a proprietary or jumbo 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开奖号码历史查询:property taxes or 澳洲幸运5开奖号码历史查询:homeowners insurance).

HECM for Purchase closing costs are higher than other reverse mortgage loans. They include an up-front 澳洲幸运5开奖号码历史查询: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开奖号码历史查询:origination fees, 澳洲幸运5开奖号码历史查询:title insurance, 澳洲幸运5开奖号码历史查询:appraisal fees, 澳洲幸运5开奖号码历史查询:credit report fees, and 澳洲幸运5开奖号码历史查询:recording fees.

Unlike a regular HECM, you’ll also need cash on hand to cover a sizable 澳洲幸运5开奖号码历史查询: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开奖号码历史查询: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开奖号码历史查询: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开奖号码历史查询:involve substantial costs, making them a poor choice for many older adults. Some less exꦺpensive options include mortgage refina🌊ncing, 澳洲幸运5开奖号码历史查询:home equity loans, or 澳洲幸运5开奖号码历史查询:downsiz🐟ing 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开奖号码历史查询:mortgage lenders, but expenses like loan origination fees, closing costs, servicing fees, and interest rates tend to vary.