Without the constraints of a job or other responsibilities holding them down, retirees are now free to look into moving into their dream home. Some want to move closer to family or live in warm weather year round. Others buy a home that better fits their physical needs. Whatever the reason, a reverse mortgage can help you move into a new home without having to make a monthly mortgage payment for that home*.
Reverse Mortgage vs. Reverse Mortgage for Purchase
A reverse mortgage and HECM for purchase are alike in many ways. For both products, at least one borrower must be 62 years of age, reside in the home as a primary residence, and you must have sufficient equity in your home, determined by age and property value, in order to qualify. Additionally, the loan becomes due when the last living borrower permanently leaves the home, does not stay current with their taxes and homeowners insurance, or if they do not maintain the property up to FHA standards. If the loan comes due when the borrower passes away, the borrower’s heirs do not inherit the debt. Instead, they have the option to maintain possession of the home through refinance if they choose.
The difference between the two is apparent in three ways: the use of your proceeds, additional qualifications, and an important step in the HECM for purchase process.
A reverse mortgage can be used to pay off your current mortgage*. Once that is done, the rest of the money will be available to you tax-free**.
On the other hand, a reverse mortgage for purchase allows seniors 62 and older to purchase a home using a reverse mortgage. The loan pays off the mortgage of the new home. There is also an additional qualification of purchasing a home with a reverse mortgage. You will need a significant down payment to be put towards your new home. This amount varies based on age and interest rate. The older you are, the less your down payment is going to be.
One of the biggest differences involves a purchase agreement. The purchase agreement is the document that is prepared when the buyer and seller agree on the purchase price. In the reverse for purchase process, you must have a purchase agreement before you can complete your application and attend counseling. Once your offer on your new home is accepted, a purchase agreement is prepared by one of the realtors involved, it is important that you obtain your own copy of this purchase agreement.
The Purchase Coordinator
The HECM for purchase has another distinct difference – only if you choose to work with One Reverse Mortgage. Clients who are looking to purchase a home with a reverse mortgage are paired with a purchase coordinator who works with them every step of the way and ensures everyone in the process is doing their part. If you have any questions, they can be cleared up with your purchase coordinator. They will:
- Help you understand the benefits of purchasing a home with a reverse mortgage.
- Provide you with resources that may help you find your dream home and sell your existing home.
- Educate you and your realtor about this program.
- Coordinate everyone in the process to make it smooth and easy for you, your realtor, and anyone else involved
*Homeowner is still responsible for taxes, insurance and property maintenance.
**Please consult with your financial adviser.