What if you could buy your dream retirement home without monthly mortgage payments?
If you’re 62 or older and thinking about making a move, traditional mortgage loans might feel overwhelming. The thought of taking on new monthly payments in retirement can be stressful, especially when you’re living on a fixed income.
Here’s something many retirees don’t know: You can purchase a home using a reverse mortgage loan. This type of reverse mortgage, called HECM for Purchase, lets you buy a new primary residence through a home equity conversion mortgage without the burden of monthly mortgage payments.
Let’s explore how this financial tool could help you make your next chapter the best one yet.
What Is HECM for Purchase?
HECM for Purchase is designed for homebuyers 62 and older. It allows you to buy a new home and eliminate monthly mortgage payments. Instead of using a traditional loan, you use the HECM to help finance the purchase. This leaves you with more cash on hand and a home without a mortgage payment.
Traditional mortgage loans require you to qualify for monthly payments, which can be challenging in retirement. A home equity line of credit requires monthly payments. But a home equity conversion mortgage (HECM) eliminates that payment burden entirely.
Why Choose a Reverse Mortgage Purchase?
This option is becoming popular among retirees for several reasons.
Preserve retirement savings
Many retirees find that a reverse mortgage purchase dramatically increases their monthly cash flow compared with traditional financing. Rather than tapping into an existing home equity line or draining your savings, you maintain your financial cushion.
Lifestyle benefits
Maybe you want to right-size to a more suitable home without financial strain. Or perhaps you’re dreaming of moving closer to family, accessing better healthcare, or reducing the maintenance burden of a larger property. A reverse mortgage purchase can make these dreams affordable.
Real-world example
Let’s say you’re 72 and found an ideal retirement home with a sale price of $600,000. With HECM for Purchase, the reverse mortgage loan might cover $250,000 of the purchase price. You’d make a down payment of $350,000, often funded by selling the home you currently own, and the result would be $0 monthly mortgage payments.
That’s financial freedom in action.
How Do Reverse Mortgages Work?
Buying a home with a reverse mortgage loan isn’t complicated; here’s what you can expect.
The financial structure
You’ll make a substantial down payment, typically 50% to 60% of the sale price. The reverse mortgage loan covers the remaining purchase amount. Most buyers fund their down payment by selling the home they currently own, making this a natural transition tool.
You’ll have to pay closing costs similar to any home purchase, plus a mortgage insurance premium that’s part of all HECM loans.
Your step-by-step journey
– First, you’ll qualify for a reverse mortgage by meeting age and financial requirements.
– Complete mandatory HUD counseling (this protects you and ensures that you understand your options).
– Get pre-approved with a reverse mortgage lender.
– Start shopping for homes within your budget.
– Make an offer and negotiate the sale price.
– Complete the standard home purchase process.
– Close on your new home and move in, with no monthly mortgage payments.
Your ongoing responsibilities
While you won’t have monthly mortgage payments, you’ll still need to pay property taxes and homeowners insurance, maintain the home as your primary residence, and keep the property in good condition. You’ll also handle any HOA fees and regular maintenance, just like any homeowner.
Qualification Requirements
Here’s what you need to qualify.
Basic eligibility
You must be 62 or older (both spouses if married, though there are protections for eligible non-borrowing spouses). The purchase must be for your primary residence, and you’ll need to meet a financial assessment showing that you can afford property taxes and homeowners insurance.
You’ll also complete HUD-approved counseling, which is a protection that ensures that you understand all your options.
Financial assessment
Lenders will verify that you have sufficient income to pay property taxes, insurance, and maintenance. You’ll need adequate funds for the down payment, usually from selling the home you currently own. Lenders will also review your credit history—though requirements are less stringent than traditional mortgage loans—and evaluate your overall debt-to-income situation.
Property requirements
Your new home must meet FHA standards. This includes single-family homes, approved condos, and some manufactured homes. The key requirement is that it will become your primary residence.
Smart Tips for HECM Purchase Success
Want to make the lending process as smooth as possible? Here are some insider tips:
– Complete your HUD counseling early—the certificate is valid for 180 days, so you’ll have plenty of time to house hunt.
– Plan for about a 45-day closing timeline, which is slightly longer than traditional purchases. Use an experienced reverse mortgage title company to help everything go smoothly.
– Don’t ask for seller credits—instead, negotiate the sale price directly. This approach works better with reverse mortgage financing.
– Be aware of flip rules. If the property you want has been sold within the past 90 days, additional appraisals may be required.
Closing costs are typically higher than traditional loans, and you’ll need to factor in the mortgage insurance premium. Make sure you’re comfortable with ongoing expenses like property taxes and homeowners insurance, since these will be your main housing costs going forward.
Is Reverse Mortgage Purchase Right for You?
This option works well for specific situations. You might be a good candidate if you:
– Want to eliminate monthly mortgage payments in retirement
– Have significant equity from selling the home you’ll use for your down payment
– Plan to stay in your new home long-term as your primary residence
– Want to preserve your retirement savings for other needs
– Are comfortable with the mortgage insurance premium and closing costs
A reverse mortgage may not be a good fit if you:
– Plan to move again within the next five years
– Can easily afford traditional mortgage loans on your retirement income
– Want to minimize upfront costs
– Would prefer a home equity line with manageable monthly payments
Your Next Chapter Starts Here
HECM for Purchase offers a unique opportunity for retirement homebuying that simply isn’t available anywhere else. You can eliminate monthly mortgage payments while achieving your housing goals—whether downsizing, relocating, or upgrading to your dream retirement home.
The key is working with an experienced reverse mortgage lender who can walk you through the numbers and help you understand exactly how this strategy fits into your retirement plans.
Our team at American Pacific Mortgage specializes in helping retirees navigate this process. We’ll review your situation, explain all your options, and help you determine if HECM for Purchase is the right move for your next chapter.
Connect with an APM Loan Advisor and Reverse Mortgage Specialist today for a no-obligation consultation. Let’s see how you can turn your retirement housing dreams into reality.
