How can I use a reverse mortgage to purchase a home? Read here for how a reverse mortgage could be used to buy a new home!
While a reverse mortgage is intended to be used by retired people to pay for life necessities, some reverse mortgage borrowers use the reverse mortgage proceeds to purchase luxury items, such as a second home. This article discusses how a reverse mortgage could be used to purchase a home.
No Stipulations for Use
While it is not intended for this use, it is possible to use a reverse mortgage to purchase a home. Reverse mortgage lenders do not place any stipulations for use on how reverse mortgage proceeds are used. However, if the funds are used foolishly and you run out, you will no longer be able to borrow money against your home equity.
Take Out a Lump Sum
The best way to use a reverse mortgage to purchase a home is to take out a lump sum when you get your reverse mortgage. Since you most likely do not have a reliable income stream beyond social security and a pension, you will probably not be approved for much of a traditional mortgage. Because of this, you will need to get a lump sum payout from your reverse mortgage. This lump sum will need to be enough to pay for the home in cash.
Must be a Vacation Home
If you are looking to use a reverse mortgage to purchase a home, you must keep in mind that the proceeds may only be used to purchase a vacation or second home. Reverse mortgage are only available for people who take out the loan against their primary residence. If you decide to move into a second home permanently, the reverse mortgage will need to be repaid which may require you to sell your primary residence.
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