If you are 62 or older and buying your next home, you have a third option most buyers never hear about. Alongside paying all cash or taking a traditional 30-year mortgage, you can use a HECM for Purchase — an FHA-insured reverse mortgage that finances the purchase itself and requires no monthly mortgage payment.
Quick answer
A traditional mortgage lets you keep more cash at closing but commits you to a monthly payment for up to 30 years. A HECM for Purchase requires a larger down payment (roughly 45–70% depending on your age and rates) but eliminates the monthly principal and interest payment entirely — while leaving far more savings invested than an all-cash purchase would.
Side-by-side comparison
- Monthly principal & interest: Traditional loan — required every month. HECM for Purchase — none. You remain responsible for property taxes, insurance, HOA dues, and upkeep.
- Down payment: Traditional — commonly 5–20%. HECM for Purchase — a larger one-time down payment based on your age, the expected rate, and the purchase price.
- Qualifying: Traditional — credit score and debt-to-income driven, which is hard on retirement income. HECM — a financial assessment of residual income and property-charge history, with no minimum credit score.
- Loan term: Traditional — 15 or 30 years of amortization. HECM — no maturity date while you live in the home as your primary residence.
- Balance over time: Traditional — falls as you amortize. HECM — rises as interest accrues. See how that curve behaves in our calculator.
- Non-recourse: Non-recourse loan: when the loan is repaid, you or your heirs won't owe more than the home's value at that time. Heirs who keep the home pay the loan balance or 95% of the appraised value, whichever is less. You still pay property taxes, insurance and upkeep, and live in the home. A traditional mortgage is full-recourse.
- Transactions: HECM for Purchase combines the sale and the financing in one closing, so there is no second refinance later.
- Counseling: HECM requires independent HUD-approved counseling. A traditional mortgage does not.
The cash-flow math
Suppose you sell your longtime California home and net $600,000, then buy a $550,000 single-story home closer to family.
- All cash: $550,000 gone, no payment, only $50,000 left in reserves.
- Traditional 30-year fixed: put down $110,000, keep $490,000 — but take on a monthly principal and interest payment for the rest of your life, paid out of fixed retirement income.
- HECM for Purchase: put down roughly $300,000, keep about $300,000 in reserves, and owe no monthly mortgage payment.
The HECM sits between the two: far more liquidity than an all-cash purchase, and no payment obligation eating into your monthly budget. The tradeoff is that the loan balance grows over time rather than shrinking, so less equity passes to heirs.
Total costs
- Traditional: lower closing costs, but decades of interest paid monthly. Over 30 years the interest often exceeds the purchase price on a low down payment.
- HECM for Purchase: an upfront FHA mortgage insurance premium (2% of the lesser of purchase price, appraised value, or the FHA limit), origination, and third-party fees, plus ongoing annual MIP of 0.5% on the balance. Full detail in our costs breakdown.
- The real comparison is not fee versus fee — it is whether you would rather preserve monthly cash flow or preserve equity for heirs.
Who it fits
- Downsizers moving to a smaller, single-story, or lower-maintenance home.
- Buyers relocating closer to children or into a lower-cost county.
- Retirees with substantial equity but modest documented income who would struggle with traditional underwriting.
- Anyone about to pay all cash who would rather keep several hundred thousand dollars invested and liquid.
Eligibility basics
- Youngest borrower must be 62 or older.
- The home becomes your primary residence within 60 days of closing.
- Eligible property types: single-family, FHA-approved condos, 2–4 units with owner occupancy, and many manufactured homes that meet FHA standards.
- Down payment funds must come from an approved source such as sale proceeds, savings, or the sale of other assets — not another loan.
Frequently asked questions
Do I really make no monthly mortgage payment?
Correct — no principal or interest payment is required while you live in the home. You must still pay property taxes, homeowners insurance, HOA dues, and maintain the property.
How big is the down payment?
Typically 45–70% of the purchase price. Older borrowers and lower expected rates mean a smaller required down payment.
Is a HECM for Purchase better than paying cash?
Often, if liquidity matters to you. Both leave you with no mortgage payment, but the HECM keeps a large share of your proceeds available instead of locked in the walls.
What happens when I sell or pass away?
The loan is repaid from the sale. Heirs can repay the balance or 95% of appraised value, whichever is less, and keep any remaining equity.
Can I compare this to my other options?
Yes — see our reverse mortgage vs. HELOC guide, review all loan options, or talk to a specialist.
Educational information only. Not a loan offer or commitment. NMLS #855360. Equal Housing Lender.
