Can I Buy A House With A Reverse Mortgage?
As you age, it's important to switch your thinking from saving for retirement to executing retirement successfully. A successful retirement looks different for everyone, but one huge factor in retirement success is quality of life, which is hugely affected by where you choose to live. Many retirees can buy a house with a reverse mortgage, and it could be right for you if you want to move. Oftentimes, it is optimal to move to a different location, maybe closer to family, or to a smaller home, or a place with better weather; the reasons are as diverse as our wonderful country, but they all have one thing in common: to increase quality of life in retirement.
While traditional mortgages are often used to purchase a home, it could be a better option to buy a house with a reverse mortgage for those aged 55+ who want to invest in their home while maintaining their financial security.
What is a Reverse Mortgage for Purchase?
A reverse mortgage for purchase is a mortgage loan that allows those aged 55+ (in most states) to purchase a home without having to make monthly mortgage payments for as long as they live in the home. The most common reverse mortgage to purchase a home with is known as a Home Equity Conversion Mortgage (HECM) for purchase, but proprietary reverse mortgages are becoming increasingly popular. Both the HECM and some proprietary reverse mortgages can be used to buy a house with a reverse mortgage.
With a reverse mortgage for purchase, a buyer can increase their buying power by combining part or all of the cash from the sale of their previous home (or other investments) with a reverse mortgage loan to buy a new home without having to worry about making monthly mortgage payments as they enjoy their retirement.
Using this method, the homebuyer can either save more cash or buy a more expensive home than their cash would allow by itself, all the while living comfortably without mandatory monthly mortgage payments.
What are the Benefits of a Reverse Mortgage for Purchase?
The reverse mortgage for purchase product offers several benefits that make it a preferred option for seniors. One of the most significant benefits is that a reverse mortgage for purchase eliminates the need for ongoing monthly mortgage payments. This means you can own a home without the worry and stress of making mortgage payments every month. Instead, you can use the equity in your home to pay for any expenses related to your new home or your life in retirement.
Another benefit is that with a reverse mortgage for purchase, you can move into a new home quickly and without stress. The product includes less stringent credit requirements compared to traditional mortgages, making it easier for seniors to qualify. If you are interested in buying a bigger or more expensive home, a jumbo reverse mortgage is also available.
A reverse mortgage for purchase is a great option for seniors who want to move into a home that is closer to family or is better suited for their retirement lifestyle. For example, you might want to move to a warmer climate to escape harsh winters, downsize your current home, or move to a more accessible property with fewer stairs.
How Much Can I Borrow with a Reverse Mortgage for Purchase?
The amount of money you can borrow with a reverse mortgage for purchase depends on your age and the value of your home. The older you are, the higher the amount you can borrow. With a jumbo reverse mortgage, the maximum lending limit is $4 million.
What Are the Risks Associated with a Reverse Mortgage for Purchase?
Like any financial product, a reverse mortgage for purchase comes with its own set of risks. One of the risks associated with a reverse mortgage for purchase is that the loan must be repaid when the borrower passes away or the home is sold. This means the borrower's heirs may not inherit any equity from the home, and the equity is used to repay the loan.
Another risk is that the borrower must maintain the home to keep it in a livable condition. This means the borrower must be able to afford repairs, property taxes, and homeowner's insurance. Additionally, if the borrower fails to pay property taxes or homeowners' insurance, the reverse mortgage can become due.
Are There Any Fees Associated with a Reverse Mortgage for Purchase?
Yes, there are fees associated with a reverse mortgage for purchase. These fees may include an origination fee, insurance premiums, and closing costs. However, these costs are often included in the loan, making it easier for seniors to afford them.
