Home Equity Conversion Mortgage (HECM) for Purchase

For clients 62 years or older, a HECM loan is designed to assist seniors to buy their next home, combining proceeds from the sale of a previous residence with a reverse mortgage – all within a single transaction.

Why Consider a HECM for Purchase?

Replaces traditional mortgage to finance a new home

The down payment is obtained from the sale of current home (or other savings and assets) and combined with a reverse mortgage

No monthly mortgage payments (borrower is responsible for continued payment of taxes, insurance, maintenance and applicable HOA fees)

HECM for Purchase Example:

Sale of client’s existing home:      $500,000      New Home purchase price:        $350,000

Pay off existing mortgage:            $200,000      Down payment:                           $200,000

Available cash after payoff:          $300,000      Complete purchase with HECM: $150,000

Monthly mortgage payment: $0

The remaining proceeds of $100,000 to be used at the client’s disposal

Benefits of a HECM for Purchase:

Pay closing costs only once instead of paying during the purchase and refinance to access additional funds Loan proceeds are tax-free

Increased discretionary cash

Allows clients to ‘right-size’ their housing needs— relocate closer to family, downsize, or find housing that is easier to navigate with your borrower’s current needs in mind

Eligibility Requirements:

The borrower must be 62 years or older (non-borrowing spouse may be under age 62)

Existing Property: Must be occupied as primary residence

New Construction: The Lender may take the initial loan application prior to the receipt of the certificate of occupancy and may take the initial application either prior to or after the completion of HECM counseling

Purchased property must be a single-family home or FHA approved residence

*Example as of 10/4/2013 and represents typical extensions of credit for a standard fixed-rate HECM loan at 5.06% interest rate. A loan origination fee of up to $5,600 applies based on the given property value. Other closing costs in an approximate amount of $4,000 also apply, as well as an Upfront Mortgage Insurance Premium payable to HUD of 2% of the property value.