Purchase Home With Reverse Mortgage

How to Buy a Home Using a Reverse Mortgage

Planning for Retirement

This article is as much for homebuyer and homeowners 62 years or older, as it is for the adult children of aging parents.

Reverse mortgages are primarily about providing financial options that include allowing you to leverage your home’s equity to help subsidize increasing health costs, or supplementing retirement income to realize a higher quality of life.

I encourage adult children of aging parents to educate themselves about reverse mortgages as an opportunity to allow, and encourage your parents to consider how a Reverse Mortgage can help allow for a better quality of life as they plan for their future.

Buying for Retirement

The home that you raised your children in is not always the best home for you to spend your retirement years in. Most times, for those of you with larger families, it just doesn’t make sense to have all of the extra bedrooms, not to mention stairs leading to upper or lower floors of your home.

If you currently own your home free and clear, or are close to it, there are several options for you that can provide for a much more active retirement.

Example – Moving into a Better Retirement

Let’s say you simply do not need as much home as you own currently, would like to move closer to family, or simply want to move to a retirement community that offers greater amenities and access to activities.

Using a Reverse Mortgage could give you the ability to sell your current home, and put a fraction of the proceeds into a new Equity Conversion (Reverse) Mortgage, leaving the remainder of the proceeds as reserves, or to invest in vehicle that increases monthly cash flow with no mortgage payments to be made on your new home.

As an example, let’s say a homeowner is 71 years old and has $300,000 of equity in your current home. For this example, you are also purchasing a home that costs $300,000.

The quick and easy answer would be to sell your existing home, and use the proceeds to purchase your new retirement lifestyle, leaving you with only property taxes and homeowner’s insurance to worry about.

With a Reverse Mortgage, you could put down just over $140,000 toward the purchase of the new home, and still have NO PAYMENTS for as long as you live in the home, again only being responsible for property taxes and homeowner’s insurance.

You accomplish the exact same goal as before, except you are now $160,000 more liquid, which you can use to set up college funds for your Grandchildren, invest in cash flow vehicles to increase your monthly income, or keep as cash reserves for emergencies.

No Credit, No Income, No Problem

Qualifying for a Reverse Mortgage hinges on two factors, the age of the borrower, and the equity in the home. Your income and credit profile are never taken into consideration.

This is an often overlooked benefit of using a Reverse Mortgage that prevents many seniors from accessing their retirement equity because they are under the impression that they do not earn enough money to take out a loan, or your credit is not perfect.

If your income and credit allows you to qualify for a home loan, or home equity line of credit, using the above scenario, you can access $140,000 of the equity in your $300,000 home to purchase your new home using a Reverse Mortgage, and rent out your current home, collecting enough rent to easily cover the mortgage payment on the new loan.

In this scenario, you retain your current home, create residual rental income, and have the ability to purchase your dream retirement home with no payments for the rest of your life, without having to income qualify.

Myths and Misunderstandings About Reverse Mortgages

There are many myth and misunderstanding about Reverse Mortgages that prevent seniors, and adult children of aging parents from even considering this as an option. Let’s take a look at some of the more common concerns we hear:

Myth #1: The Lender Owns The Home – This simply is not true. You retain title to your home, and have the ability to sell your home at any time. Your heirs have 1 year to refinance, or sell the home once they receive title to the home upon your passing.

Myth #2: The Home Must Be Free and Clear – Many homeowners actually use a Reverse Mortgage to pay off an existing mortgage and eliminate monthly mortgage payments.

Myth #3: Only Poor People Need Reverse Mortgages – The perception that reverse mortgages are only used by low income seniors because they have no choice is quickly changing.

Many affluent senior homeowners with multi-million dollar homes and large retirement assets are using Reverse Mortgages as part of their financial and estate planning. Consult your financial professionals and estate attorneys about how this option may enhance your overall quality and enjoyment of life in your retirement years.

Working with a Creative Lender

As a direct lender in California, we pride ourselves in being on the cutting edge of creative financing solutions. When I say “creative” I mean that we know our guidelines, and we know how to fight through the hurdles of complicated situations that others may not have the experience or patience to figure out.

A Reverse Mortgage is not the best solution for everyone. However, having the ability to educate yourself about the many incredibly beneficial options available to you, or your aging parents, puts yet another option on the table for meeting financial goals, and improving your quality of life.

Our phone number go to our cell phones, and we are available when you have a question.  Don’t be afraid to leave a message, I promise we will get back to you in a timely manner.

This article originally posted on

By Diego Loya

Diego Loya is a Realtor - Broker at Home Living Real Estate Brokerage, a Orange County full services real estate company. Over the past 12 years, Diego has helped homeowners sell and buy their homes. He's loves educating and empowering real estate consumers. You can find him on Google, Facebook and Twitter.

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