How does the HECM for Purchase work?
With a regular "conventional" type mortgage, you borrow money from the lender and make monthly principle and interest payments. The amount of down payment required is calculated based off your credit and how much monthly payment you can afford according to your income. These loans have a "end" date which is normally 360 months (30 years). At the end of that term, your loan is paid in full and you no longer have a monthly mortgage payment.
With a HECM for Purchase, the amount of down payment required is based on the age of the youngest borrower. The older you are, the more you qualify for (lower down payment required). The great part about the reverse mortgage is there are no monthly mortgage payments. You still must pay your property taxes, homeowners insurance and HOA dues. You can purchase your home and live there for the rest of your life without the worry of making mortgage payments.
How about an example?
Let's assume you sell your existing home and you walk away with $300,000 in cash, and that you find a new home you'd like to purchase for $300,000. If your objective is to have no mortgage payments you're probably thinking you'll have to put all $300,000 in to the new home. Leaving you with no extra funds.
Enter the HECM for Purchase....
Let's assume the youngest borrower is 70 years old. At 70, you'd need to bring approximately $171,000 of your owns funds to closing. This is the total amount needed based on estimated settlement costs and down payment (varies state to state). So you put down $171,000 of your own funds and you keep the remaining $129,000 for whatever you like. A lot of our clients will put this into an account that they'll have available to live off of, if needed.
So let's give an overview of what just happened. You purchased a new $300,000 home, you have no monthly mortgage payments AND you have additional cash remaining for future needs. Not too bad.
How about ANOTHER example?
Let's take the same age of 70 and the same $300,000 available from the sale of your home. BUT let's assume instead of purchasing a $300,000 home you want to buy a $500,000 home. If you're paying cash this isn't even an option. With cash, you're limited to a $300,000 home (technically even less because of settlement costs). With the reverse mortgage, you'd bring approximately $285,000 to closing and you'd purchase a new home for $500,000. You have no monthly mortgage payments and you just increased your purchasing power from $300,000 to $500,000. AND you still have $15,000 left over with this scenario.
This is the power of the HECM for Purchase.
Trust the Reverse Mortgage for Purchase Experts
The HECM for Purchase is a very unique loan. Rest easy knowing your transaction is being handled by the program experts at Fidelis Mortgage.
Find out how much home you can buy
We'd love an opportunity to discuss the HECM for Purchase with you in more detail. We'll meet with you in person to determine how much home you can afford and walk you through the program from A-Z.
Want to read more about the HECM for Purchase?
Click the link to the right to get an email copy of the guide "Using a Reverse Mortgage to Buy a New Home."