Use of Home Equity Conversion Mortgages (HECMs) to Purchase a Home

The use of Home Equity Conversion Mortgages (HECMs) to Purchase a Home Is Gaining In Popularity for Buyers aged 62+

By Rob Cooper, Director of Strategic Partnerships, NMLS ID 174002, Reverse Mortgage Funding LLC (RMF)

Imagine opening the front door to your new home. It’s perfect—the home of your dreams. Imagine how happy living there makes you. Now imagine owning that home without needing to make monthly mortgage payments.

Yes, it’s possible. And, no, it’s not too good to be true. Of course, as with any home loan, you continue to pay taxes, homeowners insurance, and any property-related maintenance costs such as repairs and Homeowners Association (HOA) fees.

More and more Americans age 62 or older are using a financial product called a Home Equity Conversion Mortgage (HECM) for Purchase to buy a new home without the worry of monthly mortgage payments. The product is also referred to as H4P for short, or reverse mortgage for purchase.

H4P is a growing trend with many older Americans looking to “right-size” to a home that will allow them to stay there for the duration of their retirement. Consider that the number of households headed by someone age 70 or older will surge by 42% from 2015 to 2025, according to a study by Harvard University.1 And 91% of Americans aged 50 to 80 said they wanted to stay in their own home, according to a survey conducted by Georgetown University and Philips.2

To help older Americans move into a home in which they can live more comfortably, the Federal Housing Administration (FHA) launched the HECM for Purchase program in 2008 to make it easier to right-size or relocate.

However, despite the increasing use of H4P, it is still a largely unknown home financing option. This lack of awareness, when combined with concerns about having enough money to live comfortably in retirement, leaves many qualified borrowers under the assumption that moving to a new home is not an option for them.

Though not the right option for everyone, an H4P can help qualified borrowers maintain their nest egg, improve their cash flow, or more easily afford a more expensive home or additional upgrades.

“We wanted to build, we wanted to have a nice house,” said RMF H4P client Delores Salon. “We looked into conventional loans; we looked into conventional mortgages; we also looked into the [H4P], or just paying for it out of our nest egg. And all things considered, we came around to the [H4P]. And we don’t have a mortgage payment,* and yet we still have a very beautiful house. We are not strapped for cash and we still have our nest egg. So it’s worked out really well.”

Recent studies confirm a trend that is coming into greater clarity each year: Namely, the number of households headed by those age 62 and older are surging as the Baby Boomers hit their retirement years. And they want and expect to spend their retirement in their own home. An H4P might be an attractive option to help accomplish that goal for the 10,000 Americans turning 62 every day, as estimated by the U.S. Census Bureau.

Using a HECM for Purchase can allow qualified borrowers to keep a larger amount of their cash investments in place to continue growing while buying the home where they plan to spend the rest of their lives.

There are many resources available to learn more about the HECM for Purchase program, including the U.S. Housing and Urban Development (HUD) website.

You can also contact a licensed HECM for Purchase specialist with Reverse Mortgage Funding LLC (RMF), by calling (240) 446-1300. He or she can explain the benefits of an H4P and other considerations. There’s no obligation.

A Director of Strategic Partnerships with Reverse Mortgage Funding (RMF), Rob Cooper (NMLS #174002), is an experienced HECM for Purchase specialist. He is available at (240) 446-1300 or rcooper@reversefunding.com to help educate qualified borrowers and residential real estate professionals. Branch address: 9711 Washington Blvd., Suite 555, Gaithersburg, MD 20878. Branch NMLS #1183828, Maryland Mortgage Lender License, License No. 06-20506.

* Borrower is responsible for property-related fees taxes, insurance, and property maintenance. A HECM is a home-secured debt payable upon default or a maturity event.
1. State of the Nation’s Housing Report, Joint Center for Housing Studies (JCHS) of Harvard University, 2014.
2. Aging Well: Creating Connected Communities for Aging Well, Philips and the Global Social Enterprise Initiative (GSEI) at Georgetown University’s McDonough School of Business,

This material has not been reviewed, approved, or issued by HUD, FHA, or any government agency.