WSJ: Retirees May Want to Consider HECM for Purchase

Is it logical—or even possible—for a 69-year-old to get a mortgage? a prospective home-buyer wonders in a recent Wall Street Journal column. The short answer is yes, it’s possible, although there are other options to be considered, including a reverse mortgage—or specifically, a HECM for purchase, WSJ says.

The home-buyer in question is looking to sell his current residence in order to buy a retirement home. He says he could pay all cash for the house he’s interested in, but is thinking about taking advantage of low interest rates rather than tying up all of his money in real estate.

As long as you meet a lender’s requirements as far as income, credit, and other related factors, says WSJ, you’re eligible for a mortgage, no matter what your age, under the federal government’s Equal Opportunity Credit Act. If the borrower were to pass away before the mortgage is paid off, the unpaid balance would become a lien tied to the house, and heirs would be obligated to either make the remaining payments on the mortgage, sell the house to pay off the mortgage, or refinance the loan.

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However, the article continues, another option that should be considered at the prospective buyer’s age is a reverse mortgage. Thanks to the Housing and Economic Recovery Act of 2008, says WSJ, it may even be possible for the prospective buyer to purchase the new home and get a reverse mortgage in a single transaction as long as all requirements are met. Getting a reverse mortgage allows homeowners to convert their property’s equity into cash which can be accessed through a fixed monthly amount, a line of credit, or both, the article continues.

There are some other things to be considered when contemplating a reverse mortgage, WSJ mentions. These including required reverse mortgage loan counseling, owning the home outright or have a small remaining balance on the mortgage, and remaining in that home as a primary residence.

It may be years before you will see much appreciation on your new home, says WSJ, so it’s recommended to free up at least some cash rather than sinking it all in real estate.

View the original article here.

Written by Alyssa Gerace

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  • That is truly taking the HECM outside of a loan of last resort category.  A few more well placed articles like this will go a long way to helping our industry change that image.

    • I agree that this Industry needs more positive stories about Reverse Mortgages and how they help Senior homeowners. Seniors need help in this economy more than the rest of us working stiffs. The HECM for Purchase is a great tool to allow the Senior buyer to purchase their last home and still have some money left to live on and/or travel and/or spend on family members. All  of the Seniors I have helped with the HECM for Purchase loans have loved them and have sent me several referrals form their friends and family. Long Live the HECM Program.
      David DeLorm …VanDyk Mortgage Corp. 616-974-9263

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