Reverse Mortgage for Purchase (H4P)


What Is H4P?

Home Equity Conversion Mortgage (HECM) for Purchase (H4P) is a reverse mortgage that allows seniors aged 62 or older, to buy a new principal home using loan proceeds from a reverse mortgage. The HECM for Purchase Program provides the opportunity to purchase a new principal residence with HECM loan proceeds in a single transaction. The HECM loan does not require mortgage loan repayment until the borrower permanently leaves the home.

A reverse mortgage is a complex financial tool. When deliberating whether it’s a good fit, guidance is best left to the experts with the most experience. NWRM has a responsibility to ensure this program is a great fit for each client. We take the time to provide informed and reassuring guidance to ensure this step is taken in a professional and friendly manner, and that you enjoy an outstanding lending experience.

How Does It Work?

With an H4P loan, people can take out a reverse mortgage and buy a new home in the same transaction. Usually, Homebuyers have a large cash down payment that is about 40-50% of the new home's purchase price. They then use the reverse mortgage loan to borrow 50 to 60% against the home equity of the new property to complete the purchase of their new home. The homeowners are not required to make any monthly mortgage payments as long as they reside in the home and are expected to maintain the home and cover homeowners’ insurance.

How Can You Use an H4P Loan?

These HECM for purchase loans are solely used to buy a new primary residence for the borrower.

H4P Government Eligibility Requirements

To qualify for a HECM for purchase loan, the following eligibility requirements must be met:

  • One borrower must be aged 62 or older
  • The new home must be used as the primary residence
  • The property must be a single-family home, townhome, or FHA-approved condo
  • The difference between the purchase price of the new home and the HECM loan proceeds must be paid in cash from qualifying sources such as the sale of a prior residence, home buyer’s other assets, or savings
  • Borrowers must complete HUD-approved counseling
  • HECM for Purchase Repayment Requirements

    The borrower can choose to repay as much or as little as they like each month, or make no monthly mortgage payments. The flexible repayment feature makes it easier for a buyer to afford the home they really want, preserve more savings and retirement assets, and improve cash flow. As with most mortgages, the borrower must keep current with property-related taxes, insurance, and maintenance as part of their ongoing loan obligations. Repayment is generally required once they sell the home, pass away, move out, or fail to meet the loan obligations.

    What’s Different About HECM for Purchase vs. Traditional Mortgage?

    An H4P loan borrows against the equity of a new home to allow borrowers to buy a home without a monthly mortgage payment. There are different requirements for a reverse purchase mortgage compared to traditional mortgages and the lending limits are stricter on traditional loans.

    Purchasing a Home with a Reverse Mortgage

    Down Payment Requirement

    The HECM for Purchase program requires a down payment of between approximately 29% and 63% of the purchase price, depending on the buyer’s age or Eligible Non-Borrowing Spouse’s age, if applicable. (This range assumes closing costs will be financed.) The rest of the funds for purchase come from the HECM loan. This allows the buyers to keep more of their cash to use as they wish, as compared to paying all cash, while still having the flexibility of no required monthly mortgage payments.

    How Are Loan Amounts Calculated?

    How loans are calculated?

    The loan amount is determined by the age of the borrower, the current interest rate and the value of the home. This calculation is determined by the Department of Housing and Urban Development (HUD). †These are age-based loans that allow older borrowers to qualify for more in loan proceeds.

    What Kind of Home Can You Buy?

    This loan can be used to purchase single-family homes, townhomes, and FHA-approved condos.

    Should You Consider a HECM for Purchase?

    This program is a great fit if you:

  • Are ready to downsize, up-size, move closer to family, move to a senior community, or buy their “dream home” and don’t want to take on a required monthly mortgage payment.
  • Live on a fixed income; are concerned about being able to afford a new home via cash purchase or traditional financing; and/or want to avoid tapping into their retirement nest egg.
  • Your current home no longer fits your lifestyle – For example, the washer and dryer are down in the basement; the yard is too big to take care of; you need or prefer a one-floor living situation. You want a new home that’s a better fit for your needs.
  • You want to increase your purchasing power to buy the home you really want, with the amenities you need or desire.
  • You want to preserve some of the proceeds from the sale of your home as cash or other retirement savings.
  • Frequently Asked Questions

    When does the H4P have to be repaid?

    Although H4P loans don’t require a monthly mortgage payment, borrowers can make payments as they want. Repayment is generally required once they sell the home, pass away, move out, or fail to meet the loan obligations.

    What are the benefits of H4P?

    There are many benefits to an H4P loan, including:

  • Buying a home that better fits your needs
  • Purchasing a new home while saving more money
  • No monthly mortgage payments for the life of the loan (when borrowers pass or the home is sold)
  • Who is eligible for H4P?

    Borrowers must be at least 62 years of age and meet specific government requirements.

    How does the seller get paid?

    As with a traditional mortgage, the funds are paid directly to the seller, and the borrower repays the loan.

    Where can I learn more?

    You can fill out a quote form on this page or call Northwest Reverse Mortgage at (503) 427-1667 to speak with our team.

    Is the H4P mortgage interest rate fixed or variable?

    Interest rates can be fixed or variable depending on the loan program you choose.

    How is the down payment determined?

    A downpayment for a HECM for purchase loan is determined by the age of the youngest borrower, the purchase price of the new home, and current market interest rates.

    What are the borrower’s obligations?

    As with a regular HECM loan, borrowers are responsible for homeowners’ insurance, maintaining the home to FHA standards, and property taxes. Since this loan is for purchasing a new home, borrowers must move into the new home within 60 days of closing for the loan to be valid.

    Speak With Northwest Reverse Mortgage

    No matter if you know an H4P loan is right for you or you still have questions, our reverse mortgage team is ready to help you every step of the way. Contact Northwest Reverse Mortgage to discuss your reverse mortgage options.

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    © 2019 Northwest Reverse Mortgage, LLC NMLS #1834787
    Idaho Branch #2123574

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    Northwest Reverse Mortgage
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    Northwest Reverse Mortgage, LLC. ML- 5797/ CL-1834787/ DFPI# 60DBO-140333. Equal Opportunity Mortgage Broker licensed in Oregon, Washington, Idaho and California. Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. Credit on approval. Terms subject to change without notice. Not a commitment to lend. Contents not provided by, or approved by FHA, HUD or any other government agency. All potential tax benefits should be verified with a professional licensed tax advisor. NMLS Consumer Access

    At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; the loan balance grows over time and interest is charged on the outstanding balance; the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; interest on a reverse mortgage is not tax deductible until the borrower makes partial or full re-payment.