Buying a house with a reverse mortgage
September 7, 2023
With the purchase of homes being one of the best investments you can make today, many people are looking at buying additional properties to add to their portfolios. Another reason people may be looking to buy a new home is if they are feeling that their current home is becoming too much for them to maintain due to health or age reasons.
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Buying a Home with a Reverse Mortgage
If you are over 60 and are living in your own principal residence (and you have gained equity in your home by making regular mortgage payments over the years) you might be wondering if you could buy an additional or different home by using a reverse mortgage on your own residence. While this sounds somewhat complicated – it is not unheard of. In the US, under the Home Equity Conversion Mortgage (HECM) for Purchase people who are 62 years of age and older and have gained equity in their current residents can buy a new home using funds gained through a reverse mortgage.
Here is a scenario you may be familiar with. You and your partner have been living in your current residence for many years. You have raised a family, and taken good care of your home, but with the kids having moved out, you just don’t need all that living space anymore – and you are actually finding it a bit of a burden. Sound familiar? You may be wondering – can I buy a new house using a reverse mortgage?
One reason you may want to buy a house using a reverse mortgage on your current residence is that you may be finding your current residence – as you are getting older – is getting too big for your needs, has too many stairs or levels, or has a very large outdoor property to maintain. You may feel that a smaller house may better meet your needs at this time in life.
Using a Reverse Mortgage to Buy a Home
One caveat is that the home you are purchasing with the proceeds from the reverse mortgage must be your principal residence, and you need to remember that you will also need to have a down payment in the form of cash, as well as funds for closing costs. According to the AAG, the HECM for Purchase is a solution that allows Americans over 62 to achieve two important goals in one financial transaction: to be able to move into a more appropriate principal residence and to be able to attain a reverse mortgage. The transaction can save you money since you will only be responsible for one set of closing costs.
A reverse mortgage is a form of home-based loan that lets you take a portion of the equity that you have paid into your home and turn it into cash. There are some rules, and more so if you are applying for the HECM for Purchase: the property you are buying with the proceeds from your reverse mortgage must be your principal residents, and on your past house you must continue to pay applicable property taxes and insurance costs and keep the house in good condition.
There are a few steps you need to take to apply for a reverse mortgage and the team at Debt Helper USA is experienced in walking you through the process. The steps include:
- Find a financial services or credit counselling company – like Debt Helper USA – and give their team a call to begin filling out the forms
- Talk personally with a Debt Helper USA financial specialist to share your unique situation
- Prepare for an appraisal to be done of your home – Debt Helper USA can help arrange this
- Before you sign the final paperwork – review the situation with someone you trust, and feel good you have made the right decision for you, your spouse and your family
Can I Buy a House from Someone Using a Reverse Mortgage?
So, if you are wondering if you can buy a house from someone with a reverse mortgage, the answer is yes. However, this is not a simple transaction in terms of house purchase and it may be a good idea to speak to a financial counsellor before undertaking this type of purchase. As this type of purchase is called a HECM for Purchase (a federal program), it may be that you require the assistance of a financial company to walk you through the paperwork and procedures.
The team at Debt Helper USA is well versed in all kinds of house purchases and loans, including the idea of using a reverse mortgage to buy a home. With more complicated financial transactions such as these, it makes sense to talk to a professional first, just to make sure you understand all the implications on both the house you are getting a reverse mortgage for, as well as the house you are purchasing with a reverse mortgage.