Can I use a reverse mortgage to buy a new home?
THE SHORT ANSWER
Yes. A HECM for Purchase lets buyers 62 and older buy a new primary home with a reverse mortgage, combining the purchase and the loan in one closing. You make a larger down payment, often from selling your current home, and then have no monthly mortgage payment. You still pay taxes, insurance and upkeep.
What this means for you
Right-size your home without taking on a monthly payment.
- The down payment usually comes from selling your current home or savings.
- You must move in within 60 days of closing.
- The down payment cannot be borrowed money.
A way to move closer to family without a new mortgage payment.
- Useful when a parent wants a single-level home or to live nearer to you.
- Gifts toward the down payment may be allowed; ask the lender about documentation.
Preserves liquid assets that a cash purchase would consume.
- Compare against paying cash for the new home.
- The required down payment depends on the youngest borrower's age and current rates.
How the down payment is figured
The loan covers part of the price based on the youngest borrower's age, current interest rates and the home's value. You pay the rest. The older you are and the lower rates are, the smaller the down payment. A licensed reverse mortgage professional can give you an exact figure for a specific home.
What qualifies
The home must be your primary residence and meet FHA property standards. Single-family homes, FHA-approved condos and 2–4 unit properties (you live in one unit) can qualify. New construction needs a certificate of occupancy before closing.
SOURCES
- HUD Handbook 4000.1, HECM for Purchase
- HUD: Home Equity Conversion Mortgages for Seniors (hud.gov)
Rules change. This page is general education, not advice for your situation. Talk with a licensed professional before deciding.