“Earn equity from the home you own and still retain ownership.”

Elderly couple with moving boxes

In 1988 President Reagan signed the Housing and Community Development Act that allowed HUD to insure Home Equity Conversion Mortgages.   A pilot program was started in 1989 with 50 lenders. However, it wasn’t until January 1, 2009 that the program was enhanced to allow borrowers to Purchase a new or existing home using HECM funds.

The reverse mortgage for purchase program can have a number of different names including, but not limited to the following: HECM for Purchase, H4P, RM4P.  Regardless of what you call it, it can help you to be able to afford to move into a home that best fits your need and never have to make a mortgage payment as long as you live there.  Since it is still your home, you do have to make sure to stay current on all property taxes, homeowner’s insurance, maintenance and HOA fees or any other housing related costs.  Click here to learn more about the facts of reverse mortgages.

The HECM for Purchase program was designed to allow people age 62 and over to purchase a new principal residence and obtain a reverse mortgage within a single transaction. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc. 

I’ll explain how it works with a couple of different scenarios.

Scenario 1:

You have decided to sell your home.  The reasons for this are limitless, the yard is too big, the stairs are becoming difficult, you want to be closer to kids and grandkids, whatever the reason, you’ve decided to move.  The problem is that you either don’t want a new mortgage or cannot qualify for one now since you are retired and don’t have enough income.

You talk to a real estate agent and find out that you can sell your home for $195,000 and after paying off a small equity loan and pay for the closing costs, you cash out with $152,000.  This creates a problem because you can’t find a new home as nice as the one you are leaving for this price.

However, you do find a perfect patio home for $275,000.  You could take $75,000 out of your IRA and add it to the proceeds from the sale of your old home and have enough to pay cash for the new home, but then you might have to pay extra taxes for pulling so much money out in one year.  Or if the market is down, you then have to take money out at a depreciated value to cover the shortfall leaving you even less money in the future to live on.  Neither of these options is very appealing.

However, by using the reverse mortgage for purchase program, you can finance approximately $146,000 of the $275,000 purchase price after closing costs meaning that you would only have to pay a down payment of $129,000.  This would leave you with $23,000 left over. 

Here is what it would look like:

Net cash out from her old home$152,000
Purchase price of new home$275,000
New reverse mortgage loan-$146,000
Cash required for down payment$129,000
Money left in her pocket$23,000 ($152,000 – $129,000)

In a nutshell, with a reverse mortgage you can get the home that you want and bring less money for the down payment.  Now please be aware that not every situation turns out this perfect.  It depends on how much money you have for the down payment, your ages, the purchase price of the new home that you are buying, as well as the interest rates and loan programs that are available at the time. 

From 2009 to about 2015, there were a number of changes to the reverse mortgage program so things can change, and if they do, the scenario above might not be applicable.  However, since 2015, things in the reverse mortgage world seem to have settled down so let’s keep our fingers crossed that there are no more changes.

Scenario 2:

You are selling your home in an expensive market, say Denver, and moving to a less expensive market, say Greeley, Pueblo, or a small mountain town.  You own your home free and clear or have a sizable amount of equity and can pay cash for the new home. 

Using the same numbers from above, you find a great home for $275,000.  You can pay cash for it from the money that you received from the sale of your old home.  My question to you would be “why”?
Why tie up an extra $146,000, (the amount of the new reverse mortgage loan), in an asset that you can’t get back without either selling your home or obligating yourself to a monthly payment (as with an equity loan).   Depending on the amount of other assets that you have, the money you save by getting a reverse mortgage instead of paying cash for the new home could go a long way to helping you live a more comfortable lifestyle.

Here’s the bottom line – A reverse mortgage for purchase can allow you to get the home that you want while bring less money to the closing for the down payment.  If you are thinking of buying a new home and you are age 62 or above, please call me and I can go over the details of the program and create a custom quote for your specific situation.  Thanks for taking the time to read this.

Reverse Mortgage Purchase

Reverse Mortgage Guide

Free Reverse Mortgage Guide

this 28-page Consumer Guide will help you make and informed decision whether a reverse mortgage is right for you.

Kathleen Mitchell
Kathleen Mitchell

Just left us a 5 star review

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Kathleen Mitchell
September 18, 2022

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

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Mike Hoeffner
August 30, 2022

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

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Jonathan Maiolatesi
August 22, 2022

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

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Ronda Giblin
August 20, 2022

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

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John Bell
August 20, 2022

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

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Mary Bernard
August 19, 2022

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

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LESLIE HINES
August 19, 2022

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!