HECM & Jumbo Reverse Purchase Loans
If you’re in or nearing retirement and looking to “rightsize” to a home that is better suited to your evolving needs without downsizing your cash flow, a HECM or jumbo reverse purchase loan may be the perfect financial tool for you.
What are HECM and jumbo reverse purchase loans?
HECM and jumbo reverse purchase loans are specifically designed for older Americans looking to retire better in a new home that meets their needs — without depleting their savings or taking on a new monthly bill.
If you (or your spouse) are 55 or older, you can combine a one-time investment of your funds with reverse mortgage loan proceeds to purchase a new house or condo.
The best part? Unlike a traditional mortgage, monthly principal and interest payments are optional. You’re only responsible for meeting your loan obligations — keeping current with property taxes, insurance, and maintenance.
What are the benefits of HECM and jumbo reverse purchase loans?
Most people simply aren’t aware that a reverse mortgage can be used to purchase a new home or that these loans offer older homebuyers considerable advantages and greater flexibility.
- Supersize your purchasing power: You can invest in a more upscale home or a desirable location
- Maximize your cash flow: You don’t have to take on a mandatory monthly loan payment
- Prioritize your life: You can buy a new home that aligns better with your current and future plans
- Optimize your nest egg: You don’t have to risk your savings or assets and can keep more cash
HECM and jumbo reverse purchase loans loan types
Depending on your age and the sales price of the new home you’d like to buy, there are two loan options for you to consider.
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- Created in 2009 and federally-insured by the Federal Housing Administration
- Available to borrowers aged 62 and older with a maximum lending limit of $1,209,750
- Borrowers retain ownership of the home with their name on the title
- Combines a one-time cash investment with reverse mortgage funds to buy a home
- Borrowers typically make a down payment of 29% to 68% of the purchase price
- The borrower isn’t liable for any loan amount exceeding the home’s value when it’s sold
- Seller concessions of up to 6% of the sales price for origination fees and closing costs
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- Proprietary loans created by reverse mortgage lenders beginning in 2018
- Available to borrowers as young as 55, depending on the product and state
- Lending limits up to $6 million for high-value properties
- No mortgage insurance premium means lower up-front costs
- Borrowers typically make a down payment of 70% to 75% of the purchase price
- The borrower isn’t liable for any loan amount exceeding the home’s value when it’s sold
- Seller concessions of up to 6% of the sales price for origination fees and closing costs
Comparing your reverse for purchase loan options
A traditional mortgage requires less up-front investment but comes with monthly payments that can strain your finances over time. While manageable now, these payments may become burdensome as your finances change with age.
HECM and jumbo reverse purchase loans eliminate mandatory monthly payments, boosting your cash flow. You must still cover taxes, insurance, and maintenance, and the loan balance grows over time. While equity builds slower, you’ll never owe more than the home’s value at repayment, offering greater financial control.
| All Cash | Traditional Mortgage | HECM and jumbo reverse purchase loans |
|---|---|---|
| You own the home free and clear | Option to make a minimum down payment and limit up-front investment | Flexible payment feature: Monthly principal and interest payments are optional* |
| Builds equity as you pay down the loan | Provides greater purchasing power to buy an upscale or aging-ready home | |
| Allows you to retain more assets and savings and can increase cash flow |
*As with any mortgage, the borrower must meet their loan obligations, keeping current with property taxes, insurance, and maintenance.
HECM and jumbo reverse purchase loan requirements
Review these key eligibility requirements to see if a reverse for purchase loan is the right fit for you and your next home.
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Eligible borrowers
- At least one borrower must be 62 years of age or older for a HECM for Purchase
- At least one borrower must be 55+ years of age for jumbo loans, depending on the product and state
- Plan on living in their new home as their primary residence
- Can afford to keep current with property taxes, insurance, and maintenance
- Have at least a small residual income and satisfactory credit
- Down payment cannot be borrowed funds — it must come from savings or sale proceeds
- Must participate in mandatory loan counseling by an FHA-approved counselor
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Eligible properties
- Single-family homes
- Condominiums that meet certain requirements
- Planned Unit Developments (PUDs)
- Two-to-four-family homes — must be owner-occupied
- Manufactured homes that meet HUD guidelines
- Non-eligible properties: investment properties, vacation homes, bed and breakfasts
Borrower protections
Most people simply aren’t aware that a reverse mortgage can be used to purchase a new home or that these loans offer older homebuyers broader options and greater financial flexibility.
- Non-recourse feature — you won’t owe more than the value of the home at time of repayment
- Borrowers receive a Good Faith Estimate that will disclose estimated loan costs and fees up-front
- Counseling is required for all HECM for Purchase applicants — provided by HUD, AARP and others
- Mortgage insurance guarantees non-recourse protection and ensures the HECM for Purchase
HECM for Purchase at work
Meet George, age 72
George owns his home free and clear and wants to sell it for $500,000. He wants to purchase a new $700,000 aging-ready home that’s closer to his family in a state with higher living costs.
He is worried about having enough funds for the future and doesn’t want to drain his savings to pay all cash for the upscale property or take on new monthly mortgage payments.
George decides to use a HECM for Purchase loan to maximize his purchasing power, keep more funds from the sale of his former home, and avoid a monthly mortgage payment.*
WITHOUT a HECM for Purchase:
| Sales price of departing residence | $500,000 |
| Less 5% selling costs | $25,000 |
| Net proceeds (departing home) | $475,000 |
| Purchase new upscale home in cash | $700,000 |
| Net funds remaining | -$225,000 |
WITH a HECM for Purchase:
| Sales price of departing residence | $500,000 |
| Less 5% selling costs | $25,000 |
| Net proceeds (departing home) | $475,000 |
| Purchase price of new upscale home | $700,000 |
| Reverse mortgage loan amount | $268,100 |
| Cash down payment (including costs) | $448,248 |
| Net funds remaining | +$26,752 |
*As with any mortgage, the borrower must meet their loan obligations, keeping current with property taxes, insurance, and maintenance.
The example shown is for illustrative purposes only. Assumptions are: (1) 72-year-old borrower; (2) California home valued at $700,000; (3) HECM CMT Monthly Cap 5 Adjustable Rate Mortgage (ARM), which uses the 1-year CMT plus a margin of 2.750%. Initial APR is 6.875% as of 09/23/2024, which can change monthly. 5% lifetime interest cap over the initial interest rate. Maximum interest rate is 11.875% (4) the expected rate is 6.375%. Interest rates and funds available may change daily without notice. Actual cash required may vary and is based on the age of youngest borrower, interest rate, home value, and other factors. Please contact CrossCountry Mortgage for details about credit costs and terms.
