While a number of mainstream publications have picked up reverse mortgages recently, describing the benefits of these financial instruments in retirement planning, few have highlighted the critical, yet underutilized sister product: the Home Equity Conversion Mortgage for Purchase (H4P).
The HECM for Purchase is largely touted as offering borrowers a two for one; the ability to obtain a reverse mortgage and purchase a new home in one fell swoop. This offshoot of the traditional HECM reverse mortgage can be helpful for retirees who want to relocate and cannot afford the mortgage payments, or are unable to qualify for a conventional mortgage, according to an article published this week by U.S. News & World Report.
“Very few people actually use the reverse mortgage to buy a home, but it’s a great tool,” said Sylvia Gutierrez, a reverse mortgage professional in Miami who was quoted in the article. “They’re not tied to that monthly payment. Many people will benefit from that.”
Altough reverse mortgages enable borrowers to eliminate their monthly mortgage payments, with a HECM for Purchase the borrower must still have the means to cover a down payment on the new home as well as remain current on property taxes and insurance payments.
While using a reverse mortgage to purchase a new home may not be ideal for everyone, U.S. News suggests the key is to evaluate the decision as part of a total financial plan.
Read the U.S. News & World Report article.
Written by Jason Oliva