Downsizing with a Reverse Mortgage: Using Your Home Sale Proceeds
Most people think a reverse mortgage only works if you stay in the home you already own. That's not true — a program called HECM for Purchase (H4P) lets homeowners 62 and older sell their current home and use a reverse mortgage to buy a new one, often without taking on a monthly mortgage payment. It's one of the least understood tools in retirement planning, mostly because it's rarely explained clearly.
The basic idea
You sell your current home the normal way — through a real estate agent, on the open market, like any other sale. The net proceeds from that sale become your down payment on the new home. A HECM for Purchase reverse mortgage covers the rest of the purchase price. Because it's a reverse mortgage, you generally won't have a monthly mortgage payment on the new home — though you're still responsible for property taxes, homeowners insurance, HOA dues if applicable, and normal upkeep, the same as with any other reverse mortgage.
Why this appeals to downsizers specifically
This structure solves a problem a lot of downsizing homeowners run into: wanting to move to a smaller, more manageable home, or one closer to family, without wanting to carry a new monthly mortgage payment into retirement. Selling outright and paying all-cash is one option, but it uses up all of your proceeds at once. HECM for Purchase lets you put a portion of the proceeds toward the new home and preserve more of your cash and other assets, rather than tying it all up in home equity again.
How much of the purchase price do you need to bring?
This varies by your age, current interest rates, and the price of the new home — generally, older borrowers can finance a larger share of the purchase price, since the reverse mortgage calculation is partly based on life expectancy. As a general reference point, homeowners commonly bring somewhere in the range of 40–65% of the new home's purchase price from their sale proceeds, with the reverse mortgage covering the remainder — but this is a broad range, not a number you should rely on for planning. Your exact figure depends entirely on your specific numbers, and we'll calculate it precisely for your situation before you commit to anything.
One closing, not two
A practical advantage worth knowing: because the purchase and the reverse mortgage happen together, you're not stuck arranging temporary bridge financing or trying to time two separate closings perfectly. It's structured as a single transaction.
What it's not
This isn't a way to buy more home than you could otherwise afford, and it isn't free money — it's still a loan, and the balance still grows over time as interest accrues, the same as any reverse mortgage. It's a tool for restructuring how you use your equity across a move, not a way around the fundamental economics of buying a home.
The counseling requirement still applies
As with any HECM, federal law requires an independent counseling session with a HUD-approved counselor before you can move forward — a genuine, unbiased check on whether this fits your situation, not a formality. We'll walk you through what to expect from that conversation as part of our process.
Thinking about downsizing or moving closer to family?
We'll walk through your specific numbers — what your current home might sell for, and what that means for your next one.
Schedule a CallThis article is for general educational purposes and isn't a commitment to lend. Reverse mortgage eligibility, terms, required investment, and costs vary by borrower, property, and prevailing interest rates. Evergreen Mortgage Advisers, LLC — NMLS #2839469. Jennifer Yamamoto, NMLS #259293.