Real Estate Secret - Purchase Reverse Mortgage for Your Dream Retirement Home

Reverse mortgages can fund long-term care, LTC Insurance, provide retirement cash flow, and even get you your dream retirement home - if you're 62 or older, this is an option.

Recommend This Page
Real Estate Secret - Purchase Reverse Mortgage for Your Dream Retirement Home
6 Min Read June 7th, 2021

What do you mean, the Purchase Reverse Mortgage? Yes, you can use a reverse mortgage to purchase your dream retirement home!

(No way! Yes, way!)

Most people are unaware of this, but in 2009, as part of HERA (Housing Economic Recovery Act), an entirely new reverse mortgage was created specifically to assist potential homebuyers, 62 years of age and above, the HECM for Purchase.

Commonly referred to as the "Purchase Reverse Mortgage," this product allows people, entering the retirement portions of their lives, to maintain tens of thousands, and in many cases hundreds of thousands of dollars in liquidity, while still not being obligated to a monthly principal and interest payment. *

(*Real estate taxes, homeowner's insurance, and HOA fees must be paid separately)

Getting a Dream Retirement Home with a Reverse Mortgage?

So, is the Purchase Reverse Mortgage the answer to purchasing your "dream retirement home?" To answer that question factually, you would need to know exactly what a HECM for Purchase, commonly referred to as the Purchase Reverse Mortgage, truly is…

Simply put, a purchase reverse mortgage allows potential homebuyers, 62 years of age and above, to purchase their dream retirement home without the obligation of a monthly principal and interest payment for as long as at least one of the borrowers maintains the home as their primary residence. 

Unlike the traditional reverse mortgage, where the client owns a home and wishes to draw equity from it, the Purchase Reverse Mortgage furnishes the client with a single lump-sum payment upfront. (At the point of sale)

The combination of this lump sum and your investment, in other words, your down payment, allow the seller of the property to be paid in full.

What are the Results?

The combination of this lump sum and your investment, in other words, your down payment, allow the seller of the property to be paid in full.

You have purchased your dream retirement home, achieving your goal of having no monthly principal and interest payment and retain tens of thousands, if not hundreds of thousands of dollars in liquidity.

Example:

  • The Old Way - You purchase your dream retirement home for $300,000 cash

Your goal: to live in retirement free of a monthly principal and interest payment

  • The New Way

Your down payment is approximately $150,000.00*

You secure a purchase reverse mortgage for the remaining funds. ($150,000)

  • Results

You now own your dream retirement home - and you have retained $150,000.00 in liquidity to enhance the quality of your life.

*down payment is calculated based on both borrowers being 65 years old.

Actual down payment and retention of funds vary depending on the age of the youngest borrower, purchase price of the home, and interest rates at that time. Rates and terms are subject to change without notice.

Your reverse mortgage remains in effect as long as the original borrowers maintain the home as their principal residence.

The Hard Truth

So many people approaching retirement have been negatively affected by the volatile economic times in recent years. In fact, record-breaking low rates of returns on savings, CD's and annuities combined with losses taken in investment portfolios have negatively affected literally millions of seniors in this nation.

Imagine if, instead of paying cash for your retirement home, you retained 50% of the home's purchase price!

Let us use the example above.

How do you think your life would be affected if you had an "extra" $150,000.00 in cash reserves right now? And still, had no monthly principal and interest payment on your home?

  • What if it was a $400,000 home and you retained an extra $200,000.00?
  • What if it was a $500.000 home and you retained an extra $250,000.00?
  • What if it was a $600,000 home and you retained an extra $300,000.00?

I think you get the point!

Before we discuss what you possibly could do with this extra/newfound money, let us answer some basic reverse mortgage questions:

Will I Retain Ownership of My Home?

Yes, you retain title to your home during the period when you have a reverse mortgage, just the same as with a regular home mortgage. The reverse mortgage lender is merely extending a loan to the borrower. 

Because the homeowners retain the title, they remain responsible for paying property taxes, hazard insurance, and maintaining the home in reasonable condition, just as they would with a standard first mortgage or home equity loan.

Is the Interest Rate Fixed or Variable?

You can choose either a fixed or variable rate for your reverse mortgage.

When Does This Reverse Mortgage Come Due?

When none of the original borrowers remain in the home, the loan is due, or you may choose to pay off the loan early, as there is never a prepayment penalty. 

The family or heirs can sell the house or refinance the house and pay off the property's loan. So, as you can see, today's FHA-insured reverse mortgage offers protections and safeguards for seniors like never before.

Will My Current Income Affect My Ability to Secure a Purchase Reverse Mortgage?

There are income qualifications for receiving a reverse mortgage, but they are not as strenuous as those in the conventional or forward mortgage world.

Is My Credit a Factor When Securing a Purchase Reverse Mortgage?

Yes, A history of not meeting your financial obligations may adversely affect your ability to secure a reverse mortgage.

How Safe is the FHA Insured Purchase Reverse Mortgage?

They are as safe as any other government-insured loan. You or your heirs retain ALL ownership rights. You continue to own your home. It is impossible to fall behind on monthly principal and interest payments because there are none to make. 

Reverse Mortgages are "non-recourse" mortgages, which means that a debt CANNOT be passed to your heirs due to doing an FHA-insured reverse mortgage.

Options for the Extra Cash

So now that we know we can retain tens of thousands, and in most cases, hundreds of thousands of dollars in liquidity by using the purchase reverse mortgage, what are the possible options for this windfall of liquidity?

So much money, so little time!

  • You could just give these extra funds to your financial planner and ask him to invest the money in something with little to no risk that can grow over time.
  • You could purchase a single premium life insurance policy with a long-term care insurance option.
  • You could purchase traditional long-term care insurance and make monthly payments. (Afterall, you don't have a monthly mortgage payment)
  • You could purchase a Medicare Supplemental Policy if you are 65 years old or above.
  • You could utilize in-home care services if the need is immediate or arises in the future.
  • You could purchase other products or services to make the retirement portion of your life the highest quality possible!
  • You could "gift" some of these funds to your children or grandchildren, who could use the help now rather than in the future.
  • You could travel more.
  • You could buy a new Corvette! (Have you seen the new ones?)

I'm sure you can think of many other ways to enjoy this type of windfall.

(I just wanted to give you a few ideas…)

So now that we have learned what we could do with an extra couple of hundred thousand, what could we do with an extra million, or two million dollars?

Well, believe it or not, that is the topic of the next article.

The jumbo reverse mortgage, where we lend up to $4,000,000.00. (That is 4 million dollars)

Meanwhile, if you have questions about reverse mortgages, conventional mortgages, aging and long-term care just ask me. Click here and Ask Mike!

Stay safe, stay healthy and let us try to help those less fortunate than ourselves!

Recommend This Page

About the Author

Michael Banner, National Reverse Mortgage Leader/Educator at American Pacific Mortgage and Host of the 62 Who Knew Television Show, has been in the mortgage industry for over 40 years.

LTC News Contributor Mike Banner

Mike Banner

Contributor since March 5th, 2021

Editor's Note

Today's reverse mortgages are much different than those from years past. While they are not for everyone, it could be something you or a loved one can take advantage of to secure a better retirement. 

Learn more on the LTC NEWS Reverse Mortgage Page.

There are many factors to consider when planning for a future successful retirement. Planning for changing health and the consequences of aging and long-term care is one top of the list. The costs of extended health care are expensive and can change, overnight, your lifestyle and legacy. 

Affordable Long-Term Care Insurance provides you with guaranteed tax-free resources for your choice of quality care in the setting you desire. You protect assets and give your family the time to be family instead of becoming your caregiver. 

Research Tools on LTC NEWS

Use the many tools on LTC NEWS to help you learn about the available options and tax advantages available for long-term care planning. Start with the Ultimate Long-Term Care Guide

The LTC NEWS Cost of Care Calculator not only shows you current and future costs of long-term health care, but helps you find quality care in your state, shows you available planning options and tax advantages, and more. 

Other resources are available by clicking here.

Become a Guest Contributor for LTC NEWS

LTC NEWS can help you drive more traffic to your website or blog, improve your SEO, and give you the exposure you deserve. As a guest contributor, you gain a national and worldwide audience. Are you ready to write?

Be sure your article fits the LTC NEWS target audience of adults 40-70.

Topics can include but are not limited to:

  • Aging
  • Caregiving
  • Health
  • Long-Term Care
  • Retirement Planning

There are numerous other related topics, as well. Remember, you can promote yourself, your business, and your website or blog. It must have editorial content exclusive for LTC NEWS and cannot be just an advertisement. It can include links to other sites, and you can share the article link once published on your website or social media.

Email your story idea or article: newsroom@ltcnews.com or click here

Advertising and Marketing Opportunities on LTC NEWS

Marketing opportunities are abundant for your business available with LTC NEWS. Plus, working with LTC NEWS is affordable and efficient. 

Use LTC NEWS to gain exposure for yourself, drive traffic to your website or blog and improve your SEO.

Reach an educated audience. Readers of LTC NEWS are researching retirement issues, including aging, health, caregiving, and long-term care. 

Other readers seek information for a parent or other loved one who is experiencing declining health or aging issues and require extended care.   

Many marketing opportunities are available, including sponsored content articles. Sponsored content offers you a long-form way to sell yourself, your company, and your ideas.

Learn more about how LTC NEWS can help you market your business, drive traffic, and improve SEO - click here.

Share News with LTC NEWS

Include LTC NEWS in your press release distribution. If your group, organization, business, political committee, etc., have news to share, send it to LTC NEWS. Email -  newsroom@ltcnews.com 

Need to Find Care or Get Help with an LTC Insurance Claim?

LTC NEWS can arrange for free Long-Term Care Insurance claims processing and care coordination. No cost or obligation. If you have a loved one who has a policy and needs care - don't delay. Use the benefits they have in force. 

If your loved one does not have a policy and still needs long-term care, get professional help.

Click here now.

LTC News Trusted & Verified

Work With a Trusted Specialist

Get Accurate Long-Term Care Insurance Quotes

  • Has substantial experience in Long-Term Care Insurance
  • Strong understanding of underwriting, policy design, and claims experience
  • Represents all or most of all the leading insurance companies
man and woman sitting at desk
Latest
  • Latest

  • Oldest

Everything
  • Homecare

  • Health

  • Government

  • Care Facilities

  • Pets

  • People

  • Lifestyle

  • Insurance

No Results

Step 1 of 4

Find a Specialist

Get Started Today

Trusted & Verified Specialists

Work with a trusted Long-Term Care Insurance Specialist Today

  • Has substantial experience in Long-Term Care Insurance
  • A strong understanding of underwriting, policy design, and claims experience
  • Represents all or most of all the leading insurance companies

LTC News Trusted & Verified

Compare Insurers

+