Can you make use of a reverse mortgage to purchase a home?
Reverse Mortgage Purchase
You’ve probably heard of a reverse mortgage. After all, celebrities have been touting it’s praises on late night TV for years. And for many, it’s a great financial tool. But, an interesting variation allows you to use a reverse mortgage to purchase a home. This doesn’t get used very often but for some people it could be a good tool to use.
The Reverse Mortgage Process
With a reverse purchase mortgage you would buy a home.The reverse mortgage will provide the financing for between 47% and 52% of the purchase price. The remainder of the purchase price in must be paid in cash (small, unmarked bills aren’t a good idea). The buyer’s name(s) goes on the title. As in a typical mortgage, the lender holds a lien on the property. The interesting part is that no mortgage payments need to be made. The reverse loan must be paid off when the owner(s) either moves out, sells the house or dies.
During the term of the mortgage, interest will accrue. And the amount that will eventually be paid is the principal amount plus the accrued interest. However, if the balance due is more than the homes value, the owner is not responsible for the unpaid value. And that’s because insurance will pay the outstanding balance.
For buyers to take advantage of a reverse purchase mortgage, they must be at least 62 years old. As with all reverse mortgages, this program is administered by the Federal Housing Authority, therefore buyers must meet all FHA requirements.
By using this program, older Americans are able to purchase a home that better suits their needs. Additionally, they can do this without using all of their retirement assets to do so. And, they can also avoid making mortgage payments from their monthly fixed income, which they would need to do with a traditional mortgage.
When you’re ready to purchase a new home, with or without a reverse purchase mortgage, please contact us. Would prefer to search for a home in an active adult community in Monmouth County or Ocean County?
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