Using Reverse Mortgages To Buy Homes

Few lenders offered this option until recently.

They’re waiting on the government to issue appropriate underwriting guidelines.

Reverse mortgages can’t buy co-ops in New York, which is slowing the introduction of this financing to this populous state.

The New York Times reports:

Reverse mortgages, which are offered through the home equity conversion mortgage (HECM) program run by the Federal Housing Administration, an arm of HUD, had previously been available only for refinance transactions. In order to qualify, borrowers must be 62 or older.

Bronwyn Belling, who recently retired as the national program coordinator of the AARP’s reverse mortgage education project, said the recent guideline changes would help borrowers improve their living circumstances without forcing them to relinquish all their savings for a new home. She noted, though, that the loans can be complicated.

Here’s how a typical transaction might work: Let’s say a 75-year-old woman lives in a home valued at $700,000, with an outstanding mortgage of about $100,000. She sells the home for $700,000 and finds another — closer to the grandchildren, with no staircases and minimal upkeep — for $625,000.

Instead of securing a traditional “forward mortgage” for the new property, she could obtain a reverse mortgage.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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