Using a reverse mortgage to purchase a home

Using a reverse mortgage to purchase a homeIt would be a rare circumstance that purchasing a home with a reverse mortgage would be the best financial alternative. The closing costs, as more fully discussed in other sections of this website, will likely be very high. Unlike a refinancing, the closing costs cannot be paid by the lender, thus the borrower now has to paid both the large down payment and the high closing costs.

Typically a better strategy would be to purchase the home with a traditional mortgage and structuring the transaction where the lender pays most of the closing costs on that purchase, a common practice.

Once the purchase is complete, then refinance using a reverse mortgage and have the rebate pay for the high closing costs as with the standard purchase loan. Although this is a cumbersome extra step, the savings of out of pocket cash will likely be significant, thousands to tens of thousands of dollars.

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