HECM for Purchase

Consider an HECM for Purchase of a New Home

Many seniors age 62 and older use a Home Equity Conversion Mortgage (HECM) to generate funds for a more comfortable retirement, to travel, or to help children and grandchildren who may be in need of extra money. However, there is a benefit to this type loan that some seniors are not aware of. This is using an HECM for purchase of a new home.

In basic terms, the HECM for purchase can provide funds to purchase a new/different home, therefore, eliminating the need to ever make a monthly mortgage payment on this new home.

To learn more about using an HECM for purchase and other reverse mortgage requirements, contact a loan officer at Citizens Lending Group today!


A Good Reason to Consider an HECM for Purchasing a New Home

One of the most common examples of when an HECM for purchase can be a wise choice involves a retired couple who have a large, comfortable home that is too big now that their children are grown and living on their own. In these cases, it simply does not make sense to keep maintaining that large home, when much of the space is not even being used. Therefore, individuals can use an HECM for purchase to downsize to a smaller home.

Additionally, many retired couples have grown children who live in a different city or a different state. A reverse mortgage purchase will allow the seniors to move to a new home that is much closer to their children and grandchildren. In a slightly different scenario, the couple may choose to move to a warm climate for their retirement years, using the reverse mortgage to sell their current residence and purchase a new home.

An HECM for Purchase Example

While the details of this type of mortgage loan can sometimes be difficult to understand, looking at a specific example such as the one below may help with the decision. Additionally, homeowners are encouraged to contact a reverse mortgage specialist to discuss the options and devise a plan.

In example scenario, assume a couple owns a home that is worth $400,000 and they still owe $100,000 on this home. They can sell their current home and have the extra cash of $300,000 after paying off their outstaying mortgage. With the help of an HECM, they can purchase a new home for $300,000 with the following scenario and eliminate a monthly payment while still keeping some extra money for additional expenses:

New Home Purchase Price: $300,000

Down Payment (from sale of home): $200,000

Complete Purchase with HECM: $100,000

Monthly Mortgage Payment: $0

Remaining Proceeds from Reverse Mortgage Loan: $100,000


Plan Your HECM Purchase Carefully with Professional Help

When an HECM for purchase is planned with a couple’s best interests in mind, the benefits of this transaction can include:

  • Only paying closing costs once.
  • The loan funds come with no tax obligation (Check with your reverse mortgage expert to confirm this).
  • The new home is paid for with the HECM, so there are no mortgage payments on this new home.
  • Extra funds may be generated for your own use, beyond the home purchase price.

To gain a better understanding of how an HECM for purchase might work for you, contact us today!

Learn More About California Reverse Mortgages

These are just some of the basics. If you would like to learn more about reverse mortgage requirements and if a reverse mortgage is right for you, we invite you to contact us today.

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Loans made or arranged pursuant to Real Estate Corporation License Endorsement #01814249, California Bureau of Real Estate. NMLS #1109984
These materials are not from HUD or FHA and were not approved by HUD or a government agency.