Some seniors want to become homeowners for the first time – a “better late than never” decision. Others are homeowners now but want to sell their current home and purchase a different one, perhaps smaller or located closer to family.
The senior determined to purchase a house can withdraw cash on a HECM to use for this purpose. Where a standard mortgage used to purchase a house must be repaid in monthly installments, the HECM reverse mortgage doesn’t have to be repaid until the senior dies or moves out of the house permanently. In addition, the senior might not meet the income and/or credit requirements for a standard mortgage, but which are not a barrier to a reverse mortgage.
Given the decision to buy a house, using a HECM for that purpose beats the alternative of buying with a forward mortgage and paying it off later with a HECM. The advantage is that it requires only one set of settlement costs instead of two.
The down side, and it is a big one, is that the senior who uses a HECM to buy a house loses the ability to draw spendable cash from a HECM in later years.