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What is the difference between H4P and a traditional reverse mortgage?

Thirty years ago the first FHA-insured Home Equity Conversion Mortgage (HECM) was issued. Today, the loan program continues in popularity, and is constantly evolving to protect and suit the needs of senior borrowers. Traditionally an HECM reverse mortgage was thought of as a last resort for homeowners 62 and over, whose retirement nest egg was underfunded, to stay in their homes and use the funds they received from their reverse mortgage to pay for living expenses, medical expenses, and home modifications. But not all reverse mortgage borrowers want to remain in their current home. That’s why, in 2009, the FHA created the Home Equity Conversion Mortgage for Purchase, or H4P for short, for seniors who want to purchase their next primary residence. Though they have similar requirements, these programs offer two distinct areas of reverse mortgage lending.

Both Programs Require:

  • Borrowers must be at least 62 years of age or older.
  • At least 62 years of age or older
  • Homeowners must own the property as their primary residence.
  • Borrowers are required to maintain the property, pay the property taxes, insurance, and any HOA fees.
  • Borrowers don’t have to make monthly payments.
  • Borrowers still retain ownership of the property.
  • The loan is repaid when the borrower sells the property, moves from the property, or the homeowner passes away.

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Core Differences

The difference with the H4P reverse mortgage loan is that the borrower is required to pay a 50 percent down payment and they receive the other 50 percent of the purchase price from the lender. An H4P reverse mortgage is designed to allow seniors to purchase a new home and obtain a reverse mortgage in a single transaction. This program can help seniors increase their purchasing power so they can afford the home they want rather than their current home – whether the house no longer suits their aging needs or they want to relocate to be closer to family. This program is not just an option for those seniors struggling financially, it’s also a great option for middle come earners who, instead of using up their available assets towards the purchase of a new home, they can spread out their retirement longer, without having to touch investments or 401-Ks.

Learn more about how people are using home equity conversion mortgages for purchasing homes:

Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.