Yes. People 62 and older can use the proceeds from a “Home Equity Conversion Mortgage (HECM) for Purchase” loan to buy a new primary residence.
To qualify for a “HECM for Purchase” loan, you must be 62 or older and the property you are buying must serve as your primary residence. You’ll need to have the money on hand for the down payment. Additionally, closing costs will apply, and they will be more expensive than those for other reverse mortgage loans. After speaking with your reverse mortgage housing counselor, it is a good idea to shop around and speak with several lenders because some of these closing costs might be covered by the seller (depending on the laws of your state). For HECM for Purchase loans, you’ll need cash to cover any closing costs and the difference between the HECM proceeds and the sales price.
Like all reverse mortgage loans, the HECM for Purchase loan does not require monthly payments. You must still meet the requirements of the reverse mortgage, which include maintaining the property in good condition, residing there as your primary residence, and timely payment of property taxes and homeowners/flood insurance premiums.
Not all properties qualify for the HECM for Purchase loan program, please note. For instance, the HECM for Purchase loan program does not accept applications for cooperative units or certain manufactured homes.
Your right to cancel a reverse mortgage
You typically have three business days following closing with reverse mortgages to back out of the agreement without incurring penalties for any reason. This is known as your right of “rescission. ” To cancel, you must notify the lender in writing. For proof of when you sent and when the lender received your cancellation notice, send your letter via certified mail and request a return receipt. Keep copies of any communications between you and your lender. The lender has 20 days following your cancellation to return any funds you have paid for the financing of the reverse mortgage loan. After the three days, if you believe there is a reason to cancel the loan, consult an attorney to determine whether you have the legal right to do so.
Note that only Home Equity Conversion Mortgages (HECMs), the most prevalent form of reverse mortgage loan, are covered by this information.
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FAQ
Can you buy out someone’s reverse mortgage?
Reverse mortgages can’t be transferred from one borrower to another. The loan must typically be repaid shortly after the borrower passes away, vacates the property for 12 months straight, or sells it.
Can I buy my moms house if she has a reverse mortgage?
Heirs may purchase a home for 95% of its appraised value if the reverse mortgage balance exceeds the value of the property.
Can someone with a reverse mortgage sell their house?
You will be required to repay the money you borrowed plus interest and fees if you choose to sell your home while you have a reverse mortgage loan. You keep the difference if your loan balance is less than what your house sells for.
What happens with a reverse mortgage when the owner passes?
The loan becomes due and payable upon the demise of the borrower and Eligible Non-Borrowing Spouse. After receiving the lender’s notice that the debt is due and payable, your heirs have 30 days to settle the debt by purchasing, selling, or returning the property to the lender.