Many retirees dream of moving into a home that better suits their lifestyle—whether it’s downsizing, relocating closer to family, or upgrading to their ideal retirement home. What many don’t realize is that a reverse mortgage can be used to buy a home, offering a powerful way to purchase a property while eliminating the burden of monthly mortgage payments.
A Home Equity Conversion Mortgage for Purchase (HECM for Purchase or H4P) is the most common reverse mortgage product used for home purchases, but for buyers as young as 55 years old, proprietary (jumbo) reverse mortgage options may also be available.
As a leading reverse mortgage professional, I’ve helped many retirees use a reverse mortgage to purchase a home, preserving their savings and enhancing their retirement lifestyle. In this article, I’ll explain how these programs work, their advantages, and real-life examples of how my clients have used them to achieve financial security.
How Does a Reverse Mortgage for Purchase (H4P) Work?
A HECM for Purchase allows homebuyers aged 62 and older to finance a new home with a reverse mortgage instead of paying all cash or taking out a traditional mortgage. The loan is insured by the FHA, and borrowers do not have to make monthly principal and interest mortgage payments. Here’s how it works:
- The buyer makes a substantial down payment—usually from the proceeds of selling a previous home, savings, or other assets.
- The remaining cost of the home is covered by the reverse mortgage loan, requiring no monthly mortgage payments.
- The borrower retains ownership of the home and must continue to pay property taxes, homeowners insurance, and maintain the home.
- The loan balance is repaid when the borrower moves out, sells the home, or passes away.
Key Benefits of Using HECM for Purchase:
✅ Eliminates monthly mortgage payments (borrowers still pay taxes, insurance, and upkeep).
✅ Allows buyers to purchase a home without depleting their retirement savings.
✅ Increases financial flexibility by keeping more cash available for investments, healthcare, or travel.
✅ Helps retirees relocate, downsize, or upgrade while preserving their financial security.
Who Uses a Reverse Mortgage to Buy a Home?
Seniors use a reverse mortgage for purchase for a variety of reasons. Here are some common scenarios:
1. Downsizing to a More Manageable Home
Many retirees want to reduce home maintenance and move into a single-story home, a 55+ community, or a smaller, more convenient property.
🔹 Example: Bob and Susan, both in their late 60s, sold their large family home and used a reverse mortgage for purchase to buy a modern, maintenance-free condo in a senior community. Now, they enjoy more financial freedom without a monthly mortgage payment.
2. Relocating Closer to Family
As people age, they often want to move closer to their children and grandchildren.
🔹 Example: Mary, a widow in her early 70s, sold her home in California and moved to Texas to be near her daughter. She used a reverse mortgage for purchase to buy a home near her family, preserving her savings for healthcare and retirement expenses.
3. Buying a Dream Retirement Home
Some retirees don’t want to downsize—they want to upgrade their home and enjoy their golden years in comfort.
🔹 Example: Jim and Carol always wanted a home near the beach. Using an H4P loan, they bought a coastal home while keeping more of their retirement funds intact, ensuring they had financial security for years to come.
4. Preserving Retirement Assets
Many retirees worry about depleting their savings too quickly.
🔹 Example: Alan, a retired business owner, wanted to buy a new home but didn’t want to tie up all his money in real estate. Instead of paying all cash, he used a reverse mortgage to finance part of the purchase, keeping more of his assets invested for long-term financial security.
Proprietary Reverse Mortgages: An Option for Homebuyers as Young as 55
While the HECM for Purchase is the most common reverse mortgage for buying a home, it requires borrowers to be at least 62 years old. However, there are proprietary (jumbo) reverse mortgage options available to homebuyers as young as 55, depending on the state and lender.
Key Benefits of Proprietary Reverse Mortgages for Home Purchase:
✔ Available for borrowers as young as 55 (in select states).
✔ Can be used to purchase higher-value homes that exceed FHA loan limits.
✔ Offers flexibility for retirees who do not yet qualify for HECM.
✔ No monthly principal and interest mortgage payments required.
Proprietary reverse mortgages are especially useful for purchasing luxury homes, homes in high-cost markets, or for retirees who don’t meet HECM age requirements.
Is a Reverse Mortgage for Purchase Right for You?
A reverse mortgage for purchase—whether through the FHA-insured HECM for Purchase program or a proprietary loan—may be a great option if you:
✔ Are at least 62 (for HECM) or 55 (for some proprietary programs).
✔ Want to buy a home while preserving cash flow and savings.
✔ Prefer not to have monthly mortgage payments.
✔ Have a substantial down payment from a previous home sale, retirement savings, or other assets.
✔ Plan to live in the home as your primary residence.
Important Considerations:
🔹 You still need to pay property taxes, homeowners insurance, and maintenance costs.
🔹 The home must meet FHA property standards (for HECM loans).
🔹 The loan is repaid when you sell, move out permanently, or pass away.
Work with a Trusted Reverse Mortgage Expert
With over 20 years of experience specializing in reverse mortgages, I’ve helped countless retirees understand their options and make informed decisions about purchasing a home with a reverse mortgage.
If you’re considering a HECM for Purchase or a proprietary reverse mortgage, let’s talk! I can help you determine which option is best suited for your financial situation and retirement goals.
📞 Contact me today for a free consultation and discover how a reverse mortgage for purchase can help you achieve the retirement lifestyle you deserve.
Additional Resources:
🔹 U.S. Department of Housing and Urban Development (HUD) – HECM for Purchase
🔹 National Reverse Mortgage Lenders Association (NRMLA) – Reverse Mortgage Guide
🔹 Consumer Financial Protection Bureau (CFPB) – Reverse Mortgage Facts