The Reverse Mortgage for Purchase product allows seniors 62 years and older to use a reverse mortgage to purchase a home all in one transaction. By utilizing this product, along with a down payment, older Americans can fulfill their dreams of living closer to family, move to a senior community, downsize or upsize without a monthly mortgage payment.
With minimal credit and income requirements, many individuals are able to take advantage of this government insured program. Eligible properties include existing single family homes and FHA approved condominiums.
Here is an example of how the program works:
Rich and Carole Swartz want to sell their home and purchase a new home, they are 75 years old. They sell their existing home for $400,000 and use $100,000 of the proceeds to pay off their existing mortgage. That leaves them with $300,000 cash from the sale.
Now assume they want to downsize into a home that costs $300,000. Reverse mortgage proceeds would be $200,000 and the Swartz’s would need to contribute $100,000, leaving them with $200,000 after the purchase.
But what if they want to upsize to a home valued at $500,000? Reverse mortgage proceeds in this scenario would be $334,000 and the Swartz’s would be required to pay $166,000 leaving them with $134,000 cash after the purchase.
Either situation, they now live now live in their new home, free of a monthly mortgage payment, and have cash left over from the sale of their previous home.
Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, and Front Range areas of Colorado as well as Cheyenne and Laramie, Wyoming.