Even though many older adults wish to age in place, there are also many who want to move to a new home. That’s where a Home Equity Conversion Mortgage (HECM) for purchase can come in.
A HECM for Purchase allows seniors to use a reverse mortgage to fund part of the cost of a new home with one of four options, explains a recent Huffington Post article written by Jack Guttentag, known as The Mortgage Professor.
In a lot of cases, seniors seek a new home to sometimes move to a new climate or to downsize from the size of their current home and the financial burden it puts on their finances, Guttentag writes.
The reverse mortgage for purchase product is an alternative to a standard mortgage that is ideal for seniors who have sufficient equity in their current home, but want to move. Each of the four HECM for Purchase options depend on if someone is aiming to maximize their cash draw and minimize asset liquidation or vice versa.
“She can select either a fixed-rate or an adjustable-rate HECM, with the adjustable carrying a lower interest rate at the start but possibly a higher rate in the future,” the article writes. “She can also elect to limit her cash draw to 60% of her maximum borrowing power, which qualifies her for the $1500 mortgage insurance premium, or she can draw more cash and pay a $7500 premium.”
The HECM for Purchase is a much more complicated process than a forward mortgage, which is why the options that are available for a HECM for Purchase should presented to potential borrowers so they can make an educated decision on which option would be the best fit.
Read the full Huffington Post article.
Written by Alana Stramowski