Buying a Home With a Reverse Mortgage (HECM for Purchase)
You can use a reverse mortgage to buy a home, not just to borrow against one you already own. It is called HECM for Purchase, it has existed since 2009, and it works in one transaction: you bring a down payment of roughly 45 to 65 percent depending on your age, the reverse mortgage covers the rest, and you make no monthly mortgage payment afterward. It is the least understood product in the category and often the most useful for someone downsizing in California.
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The Move It Was Built For
You are 74, in a large house in Encino that no longer suits you, and it is worth $1.6 million. You want a single-storey place near your daughter in Camarillo for $900,000.
The ordinary route leaves you with the new house and roughly $700,000 in the bank. HECM for Purchase lets you put in something closer to $450,000, keep the difference, and still have no mortgage payment.
What You Have to Bring
The down payment scales with age. Older buyers put in less. The money must come from acceptable sources such as sale proceeds or savings, and it cannot be borrowed.
You still owe property taxes, insurance and upkeep, exactly as with any reverse mortgage. That obligation does not go away.
Why So Few People Know About It
It sits between two industries. Real estate agents deal with purchases and rarely touch reverse mortgages. Reverse mortgage brokers deal with existing homeowners and rarely sit at purchase closings.
The result is a product that solves a very common California problem, downsizing while keeping cash, that almost nobody is told about at the moment it would help.
The Limits
- The new home must become your primary residence, typically within 60 days.
- The same $1,249,125 FHA cap applies to counted value.
- Co-op units are specifically ineligible for HECM for Purchase.
- You complete the same HUD counseling as any other HECM.
