Close Menu

    Subscribe to Updates

    Get the latest creative news from FooBar about art, design and business.

    What's Hot

    Walgreens Store Closures: Full List of Locations Shutting Down This Month

    June 4, 2025

    Expert Predicts Summer 2025 Travel Deals: 5 Budget-Friendly Destinations to Book Now

    May 28, 2025

    Walmart Addresses Trump’s Demand to Cover Tariff Costs

    May 25, 2025
    Facebook X (Twitter) Instagram
    Friday, June 6
    X (Twitter) Instagram
    NinepenniesNinepennies
    • Home
    • Featured

      The Highest-Paying Jobs in America—And It’s Not in Finance!

      March 27, 2025

      7 Must-Buy Costco Sale Items Before They’re Gone This February 

      February 10, 2025

      Steel Stocks on the Rise: 3 Winners After Tariff Announcements

      February 4, 2025

      The Best Oil Stocks to Invest $200 in Right Now

      January 28, 2025

      Top 10 Best Jobs of the Year: High Demand, Six-Figure Salaries, and Bright Futures

      January 23, 2025
    • Entrepreneur News

      Walgreens Store Closures: Full List of Locations Shutting Down This Month

      June 4, 2025

      Walmart Addresses Trump’s Demand to Cover Tariff Costs

      May 25, 2025

      Walgreens Expands Use of Prescription-Filling Robots to Reduce Costs and Support Pharmacists During Turnaround

      May 15, 2025

      Hooters Declares Bankruptcy

      April 8, 2025

      Costco to Open 6 New U.S. Stores Next Month and Another in April—See the Locations and Dates

      February 28, 2025
    • Financial Wellness

      Smart and Risky Spots To Store Your Cash, Coins, Crypto, and More

      April 24, 2025

      The Minimum Salary Needed to Be in the Upper-Middle Class in 2025

      March 21, 2025

      Should You Buy, Sell, or Hold Amazon in 2025?

      March 7, 2025

      From Hawaii to West Virginia: The Shocking 77-Year Gap in Retirement Savings Longevity

      February 24, 2025

      Are the 3 Highest-Paying Dividend Stocks in the Dow Jones Worth Buying?

      February 17, 2025
    • Popular Now

      European Markets Climb as Trump Moves to Cut Tariffs on Auto Parts

      May 1, 2025

      Robinhood Expands Trading to Include Bitcoin, Oil, and Gold Futures 

      January 30, 2025

      Powerball Winning Numbers for January 18: Oregon Player Takes Home $328.5 Million Jackpot

      January 21, 2025

      Morgan Stanley Surpasses Estimates With Robust Equities and Fixed Income Trading Revenue

      January 20, 2025

      10-Year Treasury Yield Edges Lower Amid Anticipation of Economic Data, Fed Remarks

      November 21, 2024
    • Wealth

      America’s 10 Wealthiest Self-Made Women, According to Forbes— #1 May Surprise You

      February 5, 2025

      8 Wealthiest Royals in History

      February 4, 2025

      One Powerful ETF That Grew $10,000 to $55,000 in a Decade: Is It Worth Buying in 2025?

      January 28, 2025

      Coinbase CEO Predicts Bitcoin Could Hit Multi-Million Dollar Value

      January 24, 2025

      Dogecoin Surged After Elon Musk’s Appointment: What’s Happening With This Popular Meme Coin?

      November 18, 2024
    NinepenniesNinepennies
    Home » What Is an HECM for Purchase? Here’s What You Need to Know
    Financial Wellness

    What Is an HECM for Purchase? Here’s What You Need to Know

    AramideBy AramideOctober 28, 20246 Mins Read
    Share Facebook Twitter Pinterest LinkedIn Tumblr Reddit Telegram Email
    An image of in miniature house on a table with keys beside it
    Source: Pinterest
    Share
    Facebook Twitter LinkedIn Pinterest Email

    A reverse mortgage is a special type of loan for homeowners who are at least 62 years old. It allows them to use some of the value they have built up in their home, known as home equity. These homeowners can use their home equity without having to sell the house, and they do not have to make monthly payments on the loan. 

    People usually get a reverse mortgage to help pay for daily living or medical expenses. One common type of reverse mortgage is called an HECM for Purchase. HECM stands for “Home Equity Conversion Mortgage.” It is backed by the Federal Housing Administration (FHA). 

    With an HECM for Purchase, a homeowner can buy a new home while still using their home equity. They can receive the money differently, such as a line of credit, fixed monthly payments, or a mix of both.

    What Is a Reverse Mortgage?

    A reverse mortgage is a financial option for homeowners who are 62 years or older. Many people spend years or even decades paying off their mortgage. This means a large part of their wealth is tied up in the value of their home. This can create challenges for older adults who need money for daily expenses like medical bills, home repairs, and other costs.

    An image of elderly people looking at a phone
    Source: Pinterest

    With a reverse mortgage, these older homeowners can turn some of the value of their home into cash. Instead of making monthly payments to the bank, they will be paid based on the equity they have built in their homes.

    This means that, over time, the amount of money they owe the bank increases while the home equity decreases. When the homeowner sells the house, moves out, or passes away, the money from the home sale is used to pay off the loan.

    ALSO READ: Understanding a Reverse Mortgage Line of Credit

    What Is an HECM for Purchase?

    First, we need to know what an HECM is. A home equity conversion mortgage (HECM) is a reverse mortgage backed by the Federal Housing Administration (FHA). This type of mortgage can only be obtained through lenders that the FHA approved. 

    An image of a mortgage application form with house keys on it
    Source: Pinterest

    Most reverse mortgages offered are HECMs, which can be used for homes valued up to $1,149,825. If the house is worth more than that, a different type of reverse mortgage called a proprietary or jumbo reverse mortgage, will be needed.

    HECM for Purchase is a special version of HECM that allows people to buy a new home. The loan does not have to be paid back until the homeowner sells the house, moves out, passes away, or fails to keep up with loan responsibilities. Some of these loan responsibilities include paying property taxes or homeowners insurance.

    When using HECM for Purchase, closing costs tend to be higher than regular reverse mortgages. These costs include an upfront mortgage insurance premium of 2% of the home’s value. They also include other fees from lenders and third parties, such as loan origination, title insurance, appraisal, credit report, and recording fees.

    Unlike a standard HECM, a significant down payment is required for HECM for Purchase. The total upfront costs can range from 29% to 63% of the home’s purchase price, depending on the buyer’s age (the cost can be calculated using a mortgage calculator). The money for this down payment can come from savings, selling a previous home, or personal assets like stocks.

    Can Reverse Money Buy a Home?

    A common question is often asked: can you use a reverse mortgage to buy a principal residence? The simple answer is yes. You can use a HECM for Purchase for a reverse mortgage to buy a home. However, to be eligible, you have to follow the requirements.

    ALSO READ: Credit Union vs. Bank Mortgage: How to Make the Right Choice

    Pros and Cons of Purchase Reverse Mortgages

    The following are a few advantages and disadvantages of a purchase reverse mortgage:

    An image of bank notes with chains and a key on it
    Source: Pinterest

    Pros

    • No Monthly Payments: With a reverse mortgage, you do not have to pay a certain amount each month like a regular mortgage. Instead, the money you owe grows over time and gets paid back when you sell the house or pass away.
    • Buy a More Expensive Home: This kind of mortgage can let seniors buy a nicer or bigger home than they could using regular loans. It allows them to use some of their home’s value to help pay for the new one.
    • Live in the Home Longer: Seniors can buy homes that better suit their needs and not worry about making monthly payments, which will help them stay in their homes for a longer time.
    • Money Is Not Taxed: The money from a reverse mortgage does not count as taxable income. This means seniors can get extra cash without having to pay taxes on it.

    Cons

    • Less Ownership Over Time: As time passes, the mortgage amount you owe grows. This means you own less of your home. This can be a problem if you want to leave your house to your family later.
    • High Costs and Fees: Getting a reverse mortgage can be expensive because there are fees to pay when you first get the loan. These fees are like insurance and closing costs. They can reduce the money you have available to buy a new home.
    • Keeping Up With House Expenses: Even though you do not have to make monthly payments, you still have to pay property taxes and homeowners insurance. There is also the cost of keeping the house in good shape. If you do not pay these bills, you could lose your home.
    • Confusing Terms: Reverse mortgages can be hard to understand because they have many complicated rules. It is crucial to know how everything works and what your responsibilities are.
    • Limitations on Moving Later: If you use a reverse mortgage to buy a home, moving to a different place might be more complex without extra costs.

    Before getting an HECM for purchase, carefully consider the pros and cons. Ensure you understand the loan terms, fees, and implications for your estate to make an informed decision. Finally, consult with a financial advisor and a reputable lender to ensure that a HECM for Purchase aligns with your long-term financial goals.

    HECM HECM for Purchase mortgage Reverse mortgage
    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email
    Previous Article5 Best Mobile Payment Apps for Small Business
    Next Article Does Debt Consolidation Affect Buying a Home?

    Related Posts

    General

    Expert Predicts Summer 2025 Travel Deals: 5 Budget-Friendly Destinations to Book Now

    May 28, 2025
    Financial Wellness

    Smart and Risky Spots To Store Your Cash, Coins, Crypto, and More

    April 24, 2025
    Financial Wellness

    The Minimum Salary Needed to Be in the Upper-Middle Class in 2025

    March 21, 2025
    Add A Comment

    Comments are closed.

    Top Posts

    How to Delete Credit Karma Account: Step-by-Step Guide

    October 14, 2024

    Home Depot Penny Items: How To Find Them

    October 17, 2024

    Introducing the 2025 Caterpillar Pickup Truck for the U.S. Market

    September 5, 2024
    Stay In Touch
    • Twitter
    • Instagram
    You Might Like

    Subscribe to Updates

    Get the latest tech news from FooBar about tech, design and biz.

    Most Popular

    How to Delete Credit Karma Account: Step-by-Step Guide

    October 14, 2024

    Home Depot Penny Items: How To Find Them

    October 17, 2024

    Introducing the 2025 Caterpillar Pickup Truck for the U.S. Market

    September 5, 2024
    Our Picks

    Walgreens Store Closures: Full List of Locations Shutting Down This Month

    June 4, 2025

    Expert Predicts Summer 2025 Travel Deals: 5 Budget-Friendly Destinations to Book Now

    May 28, 2025

    Walmart Addresses Trump’s Demand to Cover Tariff Costs

    May 25, 2025
    X (Twitter) Instagram
    • Home
    • Editor’s Picks
    • About Us
    • Get In Touch
    • Privacy Policy
    • Terms of Use
    • Editorial Standards
    © 2025 Ninepennies.

    Type above and press Enter to search. Press Esc to cancel.