Is it possible to buy a home with a reverse purchase mortgage?
Reverse Purchase Mortgage
You are probably familiar with the basics of a reverse mortgage. Celebrities have been extolling it’s praises on late night TV for years.
Here is a variation which uses a reverse mortgage to purchase a home. This does not get used very often but it could be a good tool for you to use.
With a reverse purchase mortgage you would buy a home and the reverse mortgage will cover between 47% and 52% of the purchase price. The buyer has to pay the rest of the purchase price in cash. The new home is titled the buyer’s name. The lender has a lien on the property, as in a typical mortgage. However, no payments need to be made. When the buyer moves out, sells the house, or dies, the reverse loan must be paid off.
The amount to be paid is the principal amount plus accrued interest. If the balance due is more than house is worth, there will be no debt due to the owner, The outstanding balance is paid off by insurance.
This program allows older Americans to buy a house that better suits their needs without dumping all their retirement assets into it. It also allows them to avoid dipping into their monthly fixed income, which they would need to do with a traditional mortgage.
The buyer must be at least 62 years old. This program is administered, as with all reverse mortgages, by the Federal Housing Authority, and must meet all FHA requirements.