Can you use a reverse mortgage to purchase a home? This is a question we are often asked. The short answer is that reverse mortgages are rarely the best financial alternative for purchasing a home. Here’s why. The closing costs, as more fully discussed in other sections of this website, would likely be very high. Unlike a refinance, the closing costs cannot be paid by the lender. Thus the borrower would have to pay both the large down payment, and the high closing costs.
A better strategy is typically to purchase the home with a traditional mortgage, then structure the transaction so the lender pays most of the closing costs on that purchase. This is a common practice, and will save you a significant amount of money.
Once you’ve completed the purchase, then you can refinance using a reverse mortgage. The rebate will pay for the high closing costs, as with the standard purchase loan. This may be a slightly cumbersome extra step, but the out-of-pocket savings will likely be very significant; often thousands or tens of thousands of dollars.
Interested in learning more? Please request a free consultation and we’ll help you determine if a reverse mortgage is right for you.
