Home Equity Conversion Mortgage Allows Senior Citizens to Purchase a Home
Whether you’re a senior looking to purchase your first home, downsize to a smaller property or purchase an additional home, a little-known reverse mortgage tool called the Home Equity Conversion Mortgage for Purchase, or HECM, may be just the ticket.
Generally, reverse mortgages are known as a vehicle for senior citizen homeowners to access cash by borrowing against the equity in the homes they already own. In the case of HECM, however, seniors aged 62 or older can actually purchase a home by putting a reverse mortgage on it.
Here’s how HECM works: A senior citizen buyer can use an HECM to cover up to 52 percent of the home’s purchase price. The remainder must be fully funded through cash, retirement savings or gifted money. The buyer will officially own the title to the home, but the HECM lender will retain a security interest in the property. As with any reverse mortgage, there is the benefits of no monthly payment, and the reverse mortgage loan will be paid off only once the home is sold or when the borrower dies.
HECM loans provide more purchasing power to senior borrowers who want to buy a new or additional property without draining their retirement savings. However, as with any mortgage program, this tool is not for everyone. Speak with several lenders to investigate your options before taking on any reverse mortgage loan to ensure it’s the right financial move for you.
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