This is a program from the U.S. Department of Housing and Urban Development (HUD). It’s a home equity loan insured by the government and offers seniors the chance to buy a new home, allowing them to basically use the proceeds from the reverse mortgage to cover the cost. Only seniors 62 years or older are eligible to participate in this program.
Signed into a law in 1988, the program was meant to help retirees buy a new home, one that fit their needs better, with proper senior-friendly features such as handrails, ramps or wider doorways to accommodate wheelchairs. This would also allow them to move to homes much closer to their families, according to HUD.
With an HECM for Purchase, seniors can now trade a portion of their equity for cash. For many retirees living on a fixed income, this is a tremendous help. Those who want to unload their homes but don’t have a clue how or wish to downsize and move to a smaller household, one that requires less upkeep and maintenance, think of this loan as a lifesaver.
It’s like hitting two birds with one stone. When you apply for a Home Equity Conversion Mortgage for Purchase, you don’t just get a home; you also get a reverse mortgage right along with it. This means you don’t have to have separate transactions, so you save up on closings costs. All you have to do is make a down payment using the proceeds from the sale of your previous property or by using your savings. Then, the equity you earned with the down payment, coupled with the value of your new home, is added together to determine the reverse mortgage amount due to you. Want more details? Consult with a financial advisor or lender for more details.