Most people think of a reverse mortgage as a way to tap equity in a home you already own. But there's another option that's still one of the best-kept secrets in retirement: the HECM for Purchase. It lets you buy a new home with a reverse mortgage — and never make a monthly mortgage payment again.
What Is HECM for Purchase?
A HECM for Purchase is an FHA-insured reverse mortgage used at the time you buy a home. You bring a down payment (from the sale of your previous home, savings, or other funds), and the reverse mortgage covers the rest of the purchase price. You don't make monthly principal and interest payments. You still pay property taxes, insurance, and maintenance, and you must live in the home as your primary residence. But the monthly mortgage payment that so many retirees dread? It's gone.
How Much Do You Need for a Down Payment?
The amount you need upfront depends on your age (the youngest borrower on the loan), the purchase price, and current interest rates. Generally, you'll need to put down roughly 40% to 60% of the purchase price — the exact percentage is determined by the same principal limit factors used for a standard HECM. Older borrowers and lower purchase prices typically mean a smaller down payment; younger borrowers and higher prices mean a larger one. Your loan officer can run the numbers for your situation.
Who Is It For?
HECM for Purchase is ideal for retirees who want to:
- Downsize or relocate without taking on a new monthly mortgage. You sell your current home, use some of the proceeds for the down payment on the new one, and the reverse mortgage covers the rest — no payment. - Move closer to family, to a single-level home, or to a more manageable property. You get a fresh start without the burden of a traditional mortgage. - Buy a home they might not qualify for with a conventional loan. Because there's no monthly payment, there's no debt-to-income ratio for principal and interest. You still need to demonstrate you can pay taxes, insurance, and maintenance.
Real estate agents who work with 55+ buyers often find that their clients didn't know this product existed. Once they learn they can buy a home and never make a mortgage payment, it opens up options they thought were out of reach.
How the Process Works
You find the home you want to buy and sign a purchase agreement. You work with an FHA-approved lender (like Edge Home Finance Corporation) to complete the HECM for Purchase. You'll need HUD-approved counseling, a financial assessment, and an appraisal. At closing, you bring your down payment, and the reverse mortgage pays the remainder to the seller. You take title to the home and move in — with no monthly mortgage payment.
Important Considerations
The home must be your primary residence, and you must meet the same ongoing obligations as any HECM borrower: property taxes, insurance, and maintenance. The loan becomes due when the last borrower (or eligible non-borrowing spouse) no longer lives in the home. Your heirs can sell the home to repay the loan or refinance if they choose to keep it.
If you're thinking about relocating in retirement and don't want to tie up your cash in a large down payment or take on a new monthly payment, HECM for Purchase is worth exploring. I'm happy to walk you through the numbers and the process — no pressure, just clear information so you can decide what's right for you.
Have questions about reverse mortgages or want to see how much you might access? Try our calculator or schedule a conversation with Jerry.