If you are 62 or older and moving, you can buy the new home with a reverse mortgage and never make a mortgage payment on it. Here is how much cash it takes, and the rules that catch people out.
A HECM for Purchase lets someone 62 or older buy a new home with a reverse mortgage and never make a monthly mortgage payment on it. You put down a large down payment, often from the sale of your old house, and the reverse mortgage covers the rest. It is the same FHA-insured loan as a regular reverse mortgage, used at the moment you buy instead of years later.
The cash you bring is simply: purchase price + closing costs − what the reverse mortgage covers. What it covers comes from HUD’s table and depends on the youngest buyer’s age, interest rates, and the price (up to the $1,249,125 FHA limit). Older buyers need less cash.
Uses HUD’s principal limit table at a 7.68% expected rate, 2% upfront FHA mortgage insurance, the HUD origination-fee cap and about $4,000 of other closing costs. An estimate, not a quote.
| Purchase price | HECM principal limit at 70 | Est. closing costs | Cash you bring | As a share of the price |
|---|---|---|---|---|
| $300,000 | $103,500 | $15,000 | $211,500 | 70% |
| $400,000 | $138,000 | $18,000 | $280,000 | 70% |
| $500,000 | $172,500 | $20,000 | $347,500 | 70% |
| $700,000 | $241,500 | $24,000 | $482,500 | 69% |
Assumptions: principal limit from HUD’s official table at a 7.68% expected rate; upfront costs = 2% FHA mortgage insurance + the HUD-capped origination fee + about $4,000 of other closing costs. Illustrations, not quotes. Your lender and a HUD counselor give exact figures.
So at 70, expect to bring something like two-thirds or more of the price in cash. For most buyers that money comes from selling the old house.
It suits someone who is moving anyway, wants no mortgage payment, and expects to stay in the new home for many years. It suits poorly someone who might move again soon (the upfront costs won’t have time to pay off) or who wants to leave the new home to family intact, since the balance grows from day one. Compare it with simply buying a smaller home for cash in our comparison.
The purchase price plus closing costs, minus what the reverse mortgage covers. At 70, with current rates, that is typically around two-thirds of the price or more; older buyers need less.
Yes. The HECM for Purchase program lets borrowers 62 and older buy a principal residence with a reverse mortgage, paying the difference in cash at closing.
Within 60 days of closing. The home must be your principal residence.
No. The seller can contribute up to 6% of the price toward closing costs, loan fees and the upfront mortgage insurance, but not toward the down payment itself, which must come from documented, acceptable sources such as sale proceeds or savings, not borrowed money.
Educational, not individual financial advice. The Equity Ledger doesn’t originate loans. Reverse mortgages are complex and the right answer depends on your specific situation — confirm the details with a HUD-approved counselor before you decide.
Rules and figures are from U.S. government program materials current at publication; HECM limits and rates change — verify with HUD/FHA or a HUD-approved counselor.