May 7th, 2023 12:48 PM by WILLIAM GARRISON
Yes, that is correct. A HECM mortgage is a type of reverse mortgage that is insured by the Federal Housing Administration (FHA). With a HECM mortgage, the borrower can convert the equity in their home into cash without having to make any mortgage payments. Instead, the loan is repaid when the borrower sells the home, moves out, or passes away.
It's important to note, however, that borrowers are still responsible for paying property taxes, homeowners insurance, and home maintenance costs. Additionally, the amount that can be borrowed through a HECM mortgage is based on factors such as the borrower's age, the value of the home, and current interest rates. The loan balance can also increase over time due to interest and fees.
It is possible to purchase a home with a reverse mortgage, but there are some important considerations to keep in mind. First, it's important to understand that a reverse mortgage is typically used to convert the equity in a home that a borrower already owns into cash, rather than to purchase a new home. However, the Home Equity Conversion Mortgage for Purchase (HECM for Purchase) is a specific type of reverse mortgage that allows borrowers to purchase a new primary residence using the proceeds from the reverse mortgage.
To be eligible for the HECM for Purchase program, the borrower must be age 62 or older, and the purchased home must be their primary residence. The borrower must also be able to pay a down payment of at least 50% of the purchase price, with the remaining balance covered by the reverse mortgage.
Finally, it's important to work with a reputable lender and financial advisor to fully understand the terms and implications of a reverse mortgage for purchasing a new home, as well as any potential risks and alternatives.