Using a Reverse Mortgage to Buy a Home

That’s right! A Reverse loan can be used for a home purchase for buyers over the age of 62. They are perfect for those wanting to move where they want to remain for the rest of their lives. A reverse loan for purchase is beneficial for a number of reasons:

• No future payment is required;
• Borrowers on fixed income who may not qualify for a typical home loan will qualify for a reverse;
• The loan allows you to build equity in your home, and tap into it in the future;
• Flexibility - You can make interest payments if you wish to keep loan balance fixed.

Purchasing a home with a Reverse Loan requires a larger down payment than a conventional loan. The amount of cash down will depend on the age of the borrower, and the home's value. But the down payment can be gift funds! (Want to get mom and dad into their own place?) Once the purchase is completed the buyer will never have to make a loan payment. They are only responsible for paying RE taxes and insurance.

Some people ask “Why not buy all-cash?” Many "senior" buyers on fixed income rely on their retirement/investment accounts to provide additional income. By limiting the cash that is put into a home purchase, they may be able to buy a superior home, and have more cash available to put into investments for the future. Plus, if the buyer wants, he or she can put extra funds towards the down payment to increase the future availability of a line of credit, which grows at a rate equal to the interest rate on the loan plus the mortgage insurance rate.

Reverse mortgages have proven to be safe and powerful financial tools for homeowners that want to access the investment they have in their homes, without having to make monthly mortgage payments. When it is time to move up or down, into a retirement home, it is imperative to consider a Reverse loan as an option.

Here are a few answers to FAQs about Reverse Mortgages:

• You own the home, not the bank;
• You can prepay the loan at any time;
• Your heirs can pay off the loan balance through sale or refinance, which will never be more than 95% of the home value at time they inherit;
• These loans are non-recourse (so you can never owe more than the home is worth);
• Your spouse can remain in the home for their lifetime.