Duke Team of Remarkable Home Loans

     Purchasing a home with a reverse mortgage can be an attractive option for seniors who want to downsize or relocate to a new home without having to make monthly mortgage payments. The loan is repaid when the homeowner(s) moves out, sells the home, or passes away.

     To purchase a home with a reverse mortgage, the borrower must have a significant amount of equity in their current home they are selling and use that for a large down payment or be able to make a substantial down payment on the new home with other funds. The reverse mortgage can then be used to finance the remaining balance of the purchase price. Eligibility for a reverse mortgage will depend on the loan-to-value, the homeowners' ages (used to calculate the minimum needed for a down payment and the expected balance and value growth during the homeowners' life expectancy), and other factors.

     Another advantage of using a reverse mortgage to purchase a home is that it can provide flexibility in terms of monthly expenses. With a traditional mortgage, the borrower must make monthly payments to the lender. With a reverse mortgage, there are no monthly payments required. Instead, the loan is repaid when the borrower no longer lives in the home. This can be a valuable option for seniors who are on a fixed income and want to minimize their monthly expenses. Remember, however, with a reverse mortgage you will still be required to pay property taxes, homeowners insurance, and keep the home well-maintained. Failure to do any of these could result in foreclosure.

     There are some disadvantages to using a reverse mortgage to purchase a home. The fees associated with a reverse mortgage can be higher than those of a traditional mortgage, and the interest rates may also be higher. Additionally, the borrower may be required to pay for mortgage insurance, which can add to the overall cost of the loan. 

    Another potential drawback of using a reverse mortgage to purchase a home is that the borrower may not be able to leave the home to their heirs. Because the loan is repaid when the borrower no longer lives in the home, there may be little or no equity left for the borrower's heirs. However, there are some reverse mortgages which guarantee that the heirs will be able to purchase the home for no more than 95% of the current value of the home, even if the balance of the reverse mortgage loan is higher than that value.

     In summary, using a reverse mortgage to purchase a home can be a good option for seniors who want to downsize or relocate without having to make monthly mortgage payments. However, it is important to carefully consider the fees and interest rates associated with the loan, as well as the potential impact on one's heirs. It is also recommended that borrowers work with a trusted financial advisor to determine if a reverse mortgage is the right option for their unique situation.