Purchasing A Home Using A Reverse Mortgage
As the Baby Boomers reach the age of 62 and start retiring they are often looking for a new home. It may be one without stairs, in a warmer climate, or one closer to family and friends. The challenge is to not only find a mix that meets the needs of seniors but also enables them to purchase a home. Mortgage South can help in regards to this dilemma.
Reverse mortgages are available to homeowners who are 62 years of age or older. It allows them to convert part of their equity in a home into cash. It has been able to help retirees use the equity in their homes to cover various monthly living expenses, and even pay for health care.
Advantages of using a Reverse Mortgage to Purchase a Home
- There are no monthly mortgage payments required (borrowers are responsible for paying property taxes, insurance and maintain the property).
- Preserves cash savings and investments rather than liquidating savings and investments to pay all cash for the home purchase
- It is a way to leverage funds to make it possible to purchase a higher valued home.
- Provides financing so one can re-size to a lower maintenance home, a one-level home, a home more suitable for aging in place, move to be closer to children or even purchase one’s “dream home”.
Frequently Asked Questions & Answers About HECM For Purchase
What sources are allowed for the cash required to close?
- The sale of the departure home
- The sale of the borrower’s other assets
- The borrower’s personal savings
- Gift money from parties not involved in the transaction
What requirements must the new home meet?
- Must become the borrower’s primary residence
- Must be occupied by the borrower within 60 days from closing date
- Construction must be complete, the property habitable, and a certificate
What can’t be used for the cash required to close?
- Seller financing and concessions
- Funds withdrawn from credit cards
- A bridge loan of any kind
Which home is the reverse mortgage loan for?
- The reverse mortgage loan is placed on the new home. If the cash required to close comes from the sale of the departure home, that sale is a transaction separate from the HECM for Purchase transaction
What are property types eligible?
- Single family
- HUD-approved condos
- Planned unit developments (PUDs)
- Two to four unit properties (one unit to be occupied by borrower)
What are the borrower responsibilities?
Responsibilities include (but are not limited to)
- One of the borrowers continuing to live in the home
- Keeping current on tax and insurance payments on the property
- Maintaining the property according to FHA standards
Using the reverse mortgage to finance the purchase of your new home may be your solution to meeting your goals without having a monthly mortgage payment.