Home Equity Conversion Mortgage for Purchase: Helping Homeowners Age 62+ “Right-Size” Their Way into a More Comfortable Retirement

Many people know that a reverse mortgage allows homeowners age 62 an older to tap into the equity of their homes to improve their cash flow and eliminate their monthly mortgage payments. But did you know it also can be used as a home financing tool, making it easy for homeowners to buy a different home?

The Home Equity Conversion Mortgage for Purchase (also called HECM for Purchase, H4P, or reverse mortgage for purchase) is a loan program designed specifically to help homeowners age 62+ to purchase a home that’s more lifestyle-appropriate, without needing to make monthly mortgage payments. (Of course, the borrower is still responsible for property taxes, homeowners insurance, and property maintenance. A HECM is a home-secured debt payable upon default or a maturity event.)

This home financing option was created by the Federal Housing Administration (FHA) in 2008, and HECM for Purchase loans are insured by FHA. For those 62 and older, H4P has been used as an effective tool to “right-size” living accommodations- by either moving closer to a family, purchasing a one-story home, or relocating to a lifestyle community.

More than 90 percent of older Americans polled in a recent Georgetown University study say they prefer to life in their own homes when they retire. Many believe that moving to a newer home that’s more appropriately sized for their current or future needs, or moving to a home closer to their children, is not an option because they are afraid they cannot afford it. In reality, an H4P can help qualified borrowers maintain their nest egg, improve their cash flow, and often afford a more expensive new home or one with additional upgrades.

The next time someone says that reverse mortgages are “too good to be true,” ask one of the thousands of retirees who already have successfully used a Home Equity Conversion Mortgage to free up their cash flow, and are enjoying more comfortable retirements as well.

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