By Peter Bell, President of the National Reverse Mortgage Lenders Association

In previous columns, we have discussed how reverse mortgages can be a valuable tool to help seniors fund longevity without the burden of monthly loan payments or having to move from their homes. An additional and often overlooked use for reverse mortgages, but equally as valuable, is the HECM for Purchase program that allows seniors to use a reverse-mortgage loan to purchase a new home. HECM stands for Home Equity Conversion Mortgage, which is the Federal Housing Administration reverse-mortgage program.

Sometimes remaining in your current home is not the best choice, and in those instances, the HECM for Purchase program can be used to help seniors relocate to a residence that meets their needs. For instance, some seniors have used HECM for Purchase to move to a smaller home or apartment, transition to a single-level home with no stairs, find a newer home with fewer maintenance expenses, or simply move closer to family and friends. By using a reverse mortgage to purchase a new home, seniors can buy their ideal residence without the burden of monthly mortgage payments.

In a recent conversation with Sarah Hulbert, national sales manager with 1st Reverse Mortgage USA, a division of Cherry Creek Mortgage Co., Inc., she recounted the story of a close family member who used a HECM for Purchase to relocate to a home closer to the family. “They owned a multi-story home, which was not optimal, and they used the proceeds from the sale of their old home as the down payment on their home with a HECM for Purchase reverse mortgage. They have no monthly mortgage payments, and the new home is much newer, which will allow them to age in place without mobility or maintenance worries,” said Hulbert.

By using a reverse mortgage to purchase a new home, some borrowers may be able to qualify for a nicer home than they would if they paid all cash. The HECM for Purchase may allow seniors to move to a nicer community or upgrade home features, which can provide them a superior retirement experience. Hulbert tells us that the reverse-for-purchase allowed her close family member to “afford a more expensive home in a much more desirable location.”

Borrowers interested in the HECM for Purchase program should talk to their tax advisor about potential tax benefits from reinvesting the funds from a real-estate sale into another home. Many HECM for Purchase borrowers have found that these tax benefits helped them choose to purchase their retirement home rather than rent a house or apartment.

HECM for Purchase loans, as with all reverse mortgages, come with borrower responsibilities. Borrowers are responsible for making their real-estate tax and homeowners-insurance payments. Those who have reverse mortgages also have the obligation to maintain the home and pay any homeowners-association fees associated with the property.

If you are interested in a HECM for Purchase, a good place to start is at the National Reverse Mortgage Lenders Association website, www.reversemortgage.org. The website features unbiased information, a list of reputable lenders, and an online loan calculator.

The National Reverse Mortgage Loan Association (NRMLA) and the reverse-mortgage industry partnered with HUD to make the reverse mortgage one of the safest financial products available to consumers. Indeed, no other financial product has the consumer safeguards of a reverse mortgage, and lenders have well-conceived and unique programs available to help borrowers age in place. The NRMLA is dedicated to consumer protection.