One interesting feature of the some newer reverse mortgages that are available is that you can use the program to purchase a new home – all in a single transaction. The transaction reduces the out-of-pocket cash needed to buy a new home, eliminates any new monthly mortgage payment, and helps you keep more of the sales proceeds from the old house – or a larger amount of savings – to use for other purposes.
For example, let’s say a 75-year-old woman sells her home in Pennsylvania for a $100,000 profit and wants to buy a new home in Florida costing $150,000. To avoid a mortgage payment on the new house, she would need to pay $50,000 in cash. This means she would have to use the entire $100,000 from the sale of her first home, plus another $50,000 from her savings. If she doesn’t have the $50,000, she couldn’t buy the new house, unless she qualifies for a new home mortgage, which might be difficult and which in any event would require making monthly mortgage payments again.
Alternatively, the woman could qualify for about a $100,000 reverse mortgage, purchase the new home outright, or nearly so, using money from the reverse mortgage, plus the $50,000 of the profit on her Pennsylvania home. She would be in her new home with no monthly payments and approximately $50,000 in her savings account.
This type of reverse mortgage might be used, for instance, by older homeowners, who want to sell their old home and move closer to their children, to a warmer climate, or move into a home that provides greater accessibility or easier maintenance.