A reverse mortgage, or a HECM (Home Equity Conversion Mortgage), is a way to turn the equity in your home into tax free cash without having to make any monthly mortgage payments. Instead of monthly payments, the loan is repaid in one lump sum when the last borrower leaves the home. Already used by more than half a million households across the United States, the borrower is required to continue paying property taxes and insurance and maintain the home. The reverse mortgage is a government insured loan that enables seniors to gain financial independence from their ever increasing living expenses.
In 2006, the Federal Housing Administration (FHA) created the HECM for Purchase loan. This innovative loan program was designed to help seniors purchase a new primary residence using a reverse mortgage – all within a single transaction.
Very simply, the HECM for Purchase replaces a traditional mortgage to finance the new home. A down payment is combined with the HECM for Purchase loan proceeds to purchase the home. The down payment is usually obtained from the sale of your current home, or from other savings or assets.
The loan amount is based on the age of the youngest borrower, prevailing interest rates, and the value of the home you wish to purchase.
Qualifications for a HECM for Purchase reverse mortgage are based on these important factors: