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Home Equity Conversion Mortgage

The Right Loan to Help You Find the Perfect Home for Your Retirement Years

Thinking About a New Home in Retirement? You May Have More Options Than You Think.

If you're 62 or older, you may be considering a move to a home that better suits your retirement lifestyle—perhaps one that’s closer to family, easier to maintain, more accessible as you age, or even one with ocean views and the beauty you’ve always dreamed of.

At the same time, you might be wondering if the home you want is financially out of reach—or if tapping too much of your savings is worth the trade-off. Before you settle for less, explore a powerful alternative: the HECM for Purchase loan.

What is a HECM for Purchase (H4P)?
A HECM for Purchase is a reverse mortgage loan insured by the Federal Housing Administration (FHA), created specifically for homebuyers age 62 and older. It allows you to purchase a new primary residence that better fits your needs—without the burden of monthly mortgage payments.* It’s a flexible financing tool that can preserve your savings and help you enjoy the retirement lifestyle you’ve earned.

Benefits: 

An H4P can potentially help you to:

  • Increase your purchasing power to buy the home you really want

  • Free up cash flow—you will not be obligated to make monthly mortgage payments. You still must maintain the home and pay taxes and homeowners insurance.

  • Extend the life of your productive retirement assets*

  • Qualify for a mortgage in retirement. There are minimal income and credit requirements.

How an H4P Works:

Down Payment Flexibility

With a HECM for Purchase loan, you can combine a down payment—typically from the sale of your current home or other personal funds—with loan proceeds to purchase your next home. The required down payment generally ranges from 40% to 60% of the home’s purchase price, depending on several factors: the age of the youngest borrower, current interest rates, and the home’s appraised value. This structure allows you to buy a home that fits your retirement lifestyle without draining your savings.​

Repayment on Your Terms

General Requirements: 

  • You must be 62 years old or older

  • You must meet minimal credit and property requirements

  • You must receive reverse mortgage counseling from a HUD approved counseling agency

  • You must not be delinquent on any federal debt

  • Home must be a primary residence 

  • Property must be a single-family home, a 2- to 4-unit dwelling, or FHA-approved condo

One of the key benefits of a HECM for Purchase is repayment flexibility. You can choose to make monthly mortgage payments—or opt not to make any at all. As long as you continue to live in the home and meet the loan requirements (including paying property taxes, homeowners insurance, and maintaining the property), no loan repayment is due until the last borrower moves out or passes away. When the loan becomes due, you or your estate will have up to 12 months to repay the balance, typically by selling the home.

Increase your purchasing power

This information is provided as a guideline and does not reflect the final outcome for any particular homebuyer or property. The actual reverse mortgage available funds are based on current interest rates, current charges associated with loan, borrower date of birth (or non-borrowing spouse, if applicable), the property sales price and standard closing cost. Interest rates and loan fees are subject to change without notice. Following the closing of the home purchase, no further principal or interest payments will be required as long as one borrower occupies the home as their primary residence and adheres to all HUD guidelines of loan. Borrower must remain current on property taxes, homeowner’s insurance (and homeowner association dues, if applicable), and home must be maintained.

Upsizing

James and Mary, who are 62 and 59, want to move to a newly constructed home to retire. They want to keep the same size home they currently have, but home values are more than double in the new community compared to where they live currently. A Realtor® recommended to them that with a reverse mortgage for home purchase, they could buy a house similar to the one that they currently live in.

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CLIENTS COULD SELL THEIR HOUSE FOR $391,400 AND PURCHASE A NEWLY

CONSTRUCTED HOME FOR $600,000.

House and story are for illustration purposes only. House may not be available for purchase.

DID YOU KNOW? You may be able to close on an H4P loan from Fairway in as little as 15 days*

*15-day close is not available in all states and requires receiving a non-contingent appraisal within ten days from the appraiser.

Downsizing

Cindy, who is 62, is selling her current home that is owned free and clear to move closer to her grandchildren. She would like to downsize when she moves and be able to set up an annuity for her grandchildren to help pay for college*. The community she would like to move to is more expensive than her current one. A reverse mortgage can allow her to purchase a home in the new community and be able to have money left over from the sale of her current house.

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CLIENT COULD DOWNSIZE HER $400,000 HOME, PURCHASE A $375,000 HOUSE AND HAVE $170,000 TO SPEND ON AN ANNUITY.

House and story are for illustration purposes only. House may not be available for purchase.

  • What is the interest rate on a HECM loan?
    Reverse mortgage interest rates can vary by lender and whether you select a fixed or variable product. The variable interest rate is composed of two parts: an index and a lender margin (both are stated in the mortgage contract). Fairway uses the weekly average of the Constant Maturity Treasury (CMT) as the index. To find out what the current reverse mortgage interest rates are, please reach out to Fairway retirement mortgage specialist.
  • What is the interest rate on a HECM loan?
    Reverse mortgage interest rates can vary by lender and whether you select a fixed or variable product. The variable interest rate is composed of two parts: an index and a lender margin (both are stated in the mortgage contract). Fairway uses the weekly average of the Constant Maturity Treasury (CMT) as the index. To find out what the current reverse mortgage interest rates are, please reach out to Fairway retirement mortgage specialist.
  • Who qualifies for a HECM?
    To qualify for a Home Equity Conversion Mortgage (HECM), you must: Be 62 or older Own your own home (must be an eligible property type) and reside in it as your primary residence Own the home outright or have significant equity in the home Meet minimal income and credit requirements Attend a financial counseling session
  • What are the pros and cons of a HECM?
    The pros of a Home Equity Conversion Mortgage (HECM): You can convert a portion of your home’s equity into cash, fixed monthly advances, or a growing line of credit (growth applies to the unused funds). You are not obligated to make a monthly mortgage payment — although you can — for as long as you meet the loan terms. Those terms include living in the home as your primary residence and paying the property-related taxes, insurance, and upkeep expenses. The cons of a HECM: The unpaid reverse mortgage loan balance grows over time. This is because interest and fees get tacked on the unpaid loan balance. Note: You do have the option to pay down the loan balance at any time — you can pay as much or as little toward it as you would like. You are drawing down on your home equity. Naturally, that likely means your heirs would have less money (or no money at all) coming to them from that particular asset.
  • Is a HECM a second mortgage?
    No. A Home Equity Conversion Mortgage (or HECM, commonly called a reverse mortgage) must be in the first lien position. The good news is the loan proceeds can be used at closing to pay off (refinance) an existing first or second mortgage as long as the lien(s) meets the seasoning guidelines (liens that have been in place longer than 12 months or resulted in less than $500 cash to the borrower. An exception now exists for some HELOCs).
  • How is a HECM repaid?
    When a maturity event occurs (e.g., the home is no longer the primary residence of the at least one borrower or a non-borrowing spouse), the loan becomes due and payable, and the home is typically sold to repay any outstanding loan balance. Because reverse mortgages are non-recourse loans, the sale of the home after loan maturity will always satisfy the loan repayment obligation — neither the borrower nor their heirs will be personally liable for any balance deficiency.
  • Can I buy a flipped home with a HECM for Purchase loan?
    The sales contract must be signed more than 90 days from the seller’s purchase of the property.
  • Is there a Mortgage Insurance Premium (MIP)?
    With a HECM for Purchase, you will be required to pay upfront and ongoing mortgage insurance premiums. These premiums are usually financed into the loan and not paid out of pocket – their purpose is to fund the non-recourse feature, which protects you or your heirs from being stuck with a bill if your loan balance is higher than what your home sells for when the loan matures and is due and payable.
  • I want to buy a new construction home — can I start the application before the home is completed?
    Yes. You can complete the HECM for Purchase application and begin the process of securing the loan, but the appraisal, and consequently the loan closing, cannot happen until the Certificate of Occupancy has been issued.
  • What source of funds (money) are allowed when you purchase a home with a HECM for Purchase loan?
    The money must come for your liquid assets (e.g., bank accounts, CDs, retirement accounts) or from the documented sale of other assets you may have (your present home for example).
  • Why is my down payment higher with an H4P loan compared to a conventional mortgage?
    Your down payment is higher initially because you will not be required to make monthly mortgage payments (except for property-related taxes and insurance). With a traditional mortgage, you could potentially lose more in cash flow over the years because of the consistently required payments.

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Copyright©2025 Fairway Independent Mortgage Corporation (“Fairway”) NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. The youngest borrower must be at least 62 years old. Monthly reverse mortgage advances may affect eligibility for some other programs. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.

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