Reverse PURCHASE?!

Did you know?  Since 2014, Reverse mortgages can be used to PURCHASE a home. 

Reverse mortgage programs have been around for a long time to provide an opportunity for seniors 62 or over to tap into their home equity and extinguish debt at the same time. In a standard Reverse Mortgage, the borrower receives payments as long as they live there, pay taxes and insurance, and maintain the home per FHA standards. 

A Reverse PURCHASE, on the other hand, doesn’t pay out anything to the borrowers.  Instead, it serves a similar purpose as a normal ‘forward’ purchase loan – Borrower provides down payment, then Lender provides the rest. The difference is that the borrower doesn’t have to make any mortgage payments and as a result, the balance continues to grow as the interest compounds. 

The main benefit of the Reverse PURCHASE is that buyers don’t need to have the requisite income for a conventional forward loan.   This is sometimes the only solution for retirees who want to downsize into a new home but also don’t want to sacrifice liquidity by purchasing all-cash.

Another difference is that the program will require a substantial down payment of at least 40% or more, depending on the age of the youngest borrower.  Those funds must also be ‘seasoned’ in their accounts for a minimum of 90 days.  Lastly, the length of the transaction is not exactly speedy – often taking 45-60 days.