While most people are familiar with the concept of a reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), as a way to get money out of the equity in their home, there is another option to consider as well. A HECM for purchase reverse mortgage allows qualified people age 62 or older to use the funds to buy a new primary residence.
This streamlines the process and avoids the individual or couple from having to go through the reverse mortgage process and then to apply for a traditional home mortgage. With the combined processing, there is a single application and the individuals, once approved, will have the necessary funding.
The reasons that a HECM for purchase reverse mortgage may be a good option for seniors include:
* The ability to move to a smaller home that will be more manageable.
* The opportunity to move closer to the family for support as the individual or couple ages.
* The choice to move into a home that includes necessary design elements to accommodate wheelchairs, medical equipment or diverse needs as people age. This could include moving from a multi-story home to a single-story to avoid the need for stairs.
There are rules and qualifying factors to apply for a HECM for purchase. These need to be reviewed and considered and you will speak with a government-approved counselor in addition to your reverse mortgage company expert to make sure you are fully aware of the requirements.
The HECM for purchase program will only apply if the borrowers are moving into a new primary residence. It cannot be used to buy a seasonal home, a home for a family member or as an investment property.
If approved for the program, you may need to sell your current home, or have enough money to pay between 40% and 50% of the cost of the new home, as well as all closing costs.
The outstanding balance of the cost of the home is covered by the HECM for purchase reverse mortgage. As with a traditional reverse mortgage, the borrowers are not required to pay back the loan or make monthly mortgage payments as long as:
* one of the borrowers is living in the home as a primary residence;
* the homeowners, who are also the borrowers, do not vacate the property for more than 12 months;
* the taxes and home insurance payments are current;
* repairs are made to the home to keep it in reasonable condition and make necessary repairs in a timely fashion to correct any damage.
In some cases, the borrowers may find that the HECM for purchase provides them with additional funds if they are downsizing their home or moving to an area with lower home prices. If this is the case, the balance of the funds is provided to the borrower to use in any way without restrictions.
A HECM for purchase reverse mortgage is a good option for any senior wishing to relocate or purchase a more suitable home.