Absolutely. The FHA created the Reverse Mortgage purchase program in 2008 to make it easier to downsize or relocate. For example, say someone from the Bay Area wants to move closer to family in the central valley, or needs to move into a home that is adapted for senior living. They sell their house in the Bay Area and end up with $400,000 to finance their next house.
With a traditional mortgage they would have to come up with a down payment and closing costs, then make monthly payments for the life of the loan. They could also pay cash, which eliminates monthly payments but may use up their cash reserve.
Or — with the HECM for Purchase program — they could use a reverse mortgage for the purchase.
With this option on an HECM purchase of a $300,000 home, a 70 year old would need a down payment of approximately $147,000. This would leave about $253,000 from the $400,000 they had in their pocket when they left the Bay Area versus only $100,000 if they were to do a cash purchase. In addition, they would have zero mortgage payments, since the reverse mortgage would cover the rest.But, they do continue to pay the homeowner insurance and the property taxes.
So the couple has $253,000 cash and no mortgage payment - not a bad way to go for the right situation.
Comments(0)