HECM Program for Seniors Downsizing
One of the ways that many retirees help pay their living expenses is through a reverse mortgage. When done with FHA financing, these reverse mortgages can be wise decisions for some people. Now, a HECM program allows seniors to take advantage of downsizing their home and then using a reverse mortgage with the new equity. Susan Moriarty, at Gold Gateway Financial, points this out in an email she sent to me:
There has been a lot of confusion recently regarding how the FHA’s new HECM “for purchase” program works. Many seniors also still don’t know it’s available. The program was developed because the FHA noticed that seniors commonly were downsizing into a more affordable home and then taking out a reverse mortgage on the new property. These folks wound up paying two sets of closing costs. Now, these two transactions can be combined into one, potentially saving people thousands of dollars in related costs. In other words, you buy a new house or condo and finance it with a reverse mortgage (instead of a regular forward mortgage). And because it’s a reverse mortgage, you never have to make a single mortgage payment. Seniors seeking to downsize into a more affordable home now have unique access to financing in this otherwise incredibly tight credit market. The government backed “for purchase” loans are still no-recourse, just like regular HECM loans, so you or your heirs will never owe more than the value of the home.
I found this to be very interesting information. However, you should be wary of reverse mortgages in general, and make sure that you understand the terms. Some reverse mortgages come with hefty fees and restrictions. Also, reverse mortgages are not for everyone. You should speak with a third-party financial planner (fee-based) or some other professional before making the decision. Reverse mortgages can be helpful in some situations, and you want to make sure that your situation is one of those before signing the paperwork.
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