A purchase reverse mortgage is a type of reverse mortgage used when you buy a home—not when you already own one.
How it works (basic idea)
- You’re an eligible older borrower (age requirements apply).
- Instead of using your own cash down payment like in a standard mortgage, you can use the reverse mortgage to help finance the home purchase.
- After you buy the home, the reverse mortgage behaves like other reverse mortgages: it generally doesn’t require monthly mortgage payments while you live in the home (though interest and fees accumulate).
Important details
- You must still meet eligibility and property requirements (the home has to be an eligible primary residence, and there are rules about taxes, insurance, and maintenance).
- The reverse mortgage will grow over time because interest and costs are added.
- When the home is sold, you no longer live in it, or you pass away (subject to reverse mortgage rules), the loan is typically repaid from the sale proceeds (with protections for heirs depending on the program and circumstances).
Common confusion
A purchase reverse mortgage is different from:
- A standard reverse mortgage (usually used to access equity in a home you already own), and
- A home purchase where you just take a traditional forward mortgage.