Most older adults would like to age in place, but what if their current home isn’t their ideal retirement home? Whether they are looking to right size into a home where they can enjoy living in an older adult community that requires lower maintenance, live closer to family and friends, or want to lower their cost of living during retirement, a Home Equity Conversion Mortgage (HECM) may be able to help.
A HECM for Purchase is a Federal Housing Administration (FHA) insured1 home loan that allows homeowners 62 years and older to use the equity from the sale of a previous residence to buy their next primary home in one transaction. Regardless of how long they live in the home or what happens to the home’s value, the borrower only makes one initial investment (down payment) towards the purchase.
Best of all, since monthly payments are not required2, a HECM for Purchase loan may help improve cash flow in retirement. Homeowners will continue to own and maintain the title3 of the home for as long as the property remains their primary residence.
A HECM for Purchase loan can help increase purchasing power and flexibility when buying a primary residence.
- Eliminates existing monthly mortgage payments2
- Increases purchasing power
- Preserves cash
To be eligible, you will need to meet the following requirements.
- The youngest borrower must be at least 62 years of age or older
- The home must be the primary residence and have sufficient equity
- Cannot be delinquent on any federal debt
- The property must be a single-family residence, an owner-occupied 2-4 unit home, a condominium approved by the Department of Housing and Urban Development (HUD), or a manufactured home that meets FHA guidelines
- Must meet financial assessment required as established by HUD
The following conditions must be maintained for the loan to be in good standing.
- Maintain the home according to FHA requirements4
- Continue to pay property taxes and homeowners insurance
- Continue to own and live in the home as the primary residence
Safeguards for Borrowers
There are protections in place, so older adults know what to expect and can make an informed decision about a HECM for Purchase loan.
- Mortgage Insurance Premium (MIP) ensures the amount owed on the loan can never be more than the value of the home at the time of sale1
- Independent HUD counseling is required before the loan application
- A lender may only look to the value of the home for repayment; no other assets may be attached if the loan balance grows beyond the mortgaged home value (non-recourse loan)
If you’re interested in finding out if you can benefit from a HECM for Purchase for your next home, call (800) 976-6211 to speak with a licensed loan advisor today.
1 As required by the Federal Housing Administration (FHA), you will be charged an initial mortgage insurance premium (MIP) at closing and, over the life of the loan, you will be charged an annual MIP based on the loan balance.
2 Your current mortgage(s) and any other existing liens against the property must be paid off at or before closing. You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
4 If your home needs repairs to be eligible for a HECM loan, you may be able to use the proceeds of the loan to accomplish this.
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YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.