Downsizing with a Reverse Mortgage | HECM for Purchase Loan | FAR

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Articles & News

If you’re like many empty-nester retirees, you may be living in a home that is entirely too big for your needs. Especially if you upgraded your family’s home at some point while your children were growing up, chances are, you’re following along an American trend of bigger houses over time.

In percentage terms, the average home size has increased by 62% since 1973, while the median home size increased by 64%, according to U.S. Census data published in 2014. In 2015, the average new home in the U.S. was more than 2,800 square feet.

Have you thought about downsizing? Traditionally, this involves two transactions: first, selling the current home and second, purchasing a new home that is smaller and more manageable. But there’s also another way to downsize: by using a reverse mortgage.

The Home Equity Conversion Mortgage (HECM) for Purchase loan is a specific type of reverse mortgage that allows you to purchase a new home and get a reverse mortgage in a single transaction.

Why include the reverse mortgage?

You could downsize by selling and then purchasing another home, but using a reverse mortgage allows you to eliminate any mortgage payments you would ordinarily have to make. In other words, you can use the reverse mortgage proceeds to purchase your new, smaller, more manageable home, and never make another mortgage payment toward your loan.

Depending on your financial situation, you may also be able to receive payments from your new home equity, or you may be able to take out a line of credit that you can draw on at any time, offering you flexibility and a “rainy day” fund, should you need it down the road.

A reverse mortgage for purchase is still a loan, and comes with certain terms and requirements. If you’re interested in how a reverse mortgage can help you downsize, contact an experienced loan originator for more information.

This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.

Finance of America Reverse

These materials are not from HUD or FHA and were not approved by HUD or a government agency.

©2021 Finance of America Reverse LLC is licensed nationwide | Equal Housing Opportunity | NMLS ID # 2285 (www.nmlsconsumeraccess.org) | 8023 East 63rd Place, Suite 700 | Tulsa, OK 74133 | AZ Mortgage Banker License #0921300 | Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act | Georgia Residential Mortgage Licensee #23647 | Kansas Licensed Mortgage Company | Massachusetts Lender/Broker License MC2285: Finance of America Reverse LLC | Licensed by the N.J. Department of Banking and Insurance | Licensed Mortgage Banker -- NYS Banking Department where Finance of America Reverse is known as FAReverse LLC in lieu of true name Finance of America Reverse LLC | Rhode Island Licensed Lender | Not all products and options are available in all states | Terms subject to change without notice | For licensing information go to: www.nmlsconsumeraccess.org When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. The lender may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan). The balance of the loan grows over time and the lender charges interest on the balance. Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.

Questions or complaints? Email us at customerrelations@financeofamerica.com