While the Home Equity Conversion Mortgage for Purchase is viable means of obtaining a new home for qualifying borrowers, the current statistics show that very few older Americans are planning on using a reverse mortgage to buy a home.
During the home buying process, shoppers are faced with the fact that they need to determine what funding source they'll be using to make the purchase. Options for older Americans include traditional home mortgages, paying in cash (if they have the necessary amount stashed away) or a newer option of using a reverse mortgage if they are age 62 or older and meet the requirements.
But a forward mortgage tops the list of financing options for older Americans, according to a recent survey that was conducted by the National Association of Home Builders (NAHB).
The survey was conducted to determine, analyze and compare the housing preferences of baby boomers and millennials, and was rolled out in two phases. The tallying found that out of over 4,300 respondents, just 3% of them said they'd considering using a reverse mortgage to buy a home. By comparison, 28% said they'd pay in cash; 67% said they'd use a standard mortgage; 2% said they use a different method.
Surprisingly, baby boomers were the least likely to use a reverse mortgage to buy a home, accounting for just 2%. Just 3% of older Americans say they'd use a reverse mortgage to buy a home, compared to 48% that said they'd use a conventional home loan.
The nominal interest in reverse mortgages to buy a home could be related to the fact that these loans are not typically used or considered to be used to buy a home. But in the right situation, they can make sense.
Some older Americans have already used a reverse mortgage to buy a retirement home, and the numbers can stack up in favor of the borrower when it's approached properly.
Citing from a previous article we wrote: "When buying a home with a reverse mortgage, you'd have to have at least 50% in the form of a down payment. A house that is valued at $600,000, for example, would require at least $265,000 as the down payment. The transaction would be similar to a conventional home purchase, except that you would not need to qualify financially for the remaining portion, as that would be qualified under the reverse mortgage."
So there are benefits, especially for the borrower who has the extra cash on hand. However, it would get rid of your monthly payment and preserve a nice nest egg in equity that you could pass on to your heirs.