hree ways to approach the purchase Option What to weigh Pay cash No mortgage debt on the new home, but more of your available money is committed to the property. Ownership expenses continue. Traditional mortgage Retain some cash while taking on scheduled loan payments, interest and closing costs. Qualification and loan terms vary. HECM for Purchase Eligible buyers combine a cash contribution with a reverse mortgage. There are no required monthly principal-and-interest payments while loan conditions are met, but ownership expenses remain and the loan balance generally grows.
Understand what a reverse mortgage still requires
A reverse mortgage is a loan secured by your home. You retain ownership, and you must use the home as your principal residence, maintain it, and pay property taxes, homeowners insurance and applicable association charges. Failure to meet the loan obligations can lead to foreclosure.
Interest and fees are added to the balance over time, which generally increases the debt and reduces the equity available later. The loan generally becomes due when the home is sold or is no longer the borrower’s principal residence, or after the last borrower dies, subject to applicable protections for an eligible non-borrowing spouse.
That makes your expected time in the home, other financial resources and plans for your heirs important parts of the conversation. Ask for a written comparison of upfront costs, cash needed at closing, projected loan balances and ongoing expenses. Review the choices with your lender, independent counselor and other advisers as appropriate.
4. Work out your budget before touring homes
Start with a budget and a short list of the features you need. If a reverse mortgage for purchase interests you, discuss eligibility and timing with a qualified loan professional before writing an offer.
Your broker can help evaluate properties and the steps involved in selling your current home. Your loan professional can explain financing requirements and the numbers for your situation. Having those details early can help you decide whether a home is within your budget before making an offer.
Before you start your search: Write down what you most want to change about your current home. Bring that list and your budget to your broker to discuss which homes to consider.
Questions about your next move?
For help with the property search, contact Thomas. For questions about reverse-mortgage financing, contact Nina.