Reverse Mortgage Strategy

Buy a New Home Without a Monthly Payment

How South Dakota buyers 62 and older can purchase a new home - and never make a monthly mortgage payment on it.

Most people think of a reverse mortgage as something you do with a home you already own. Few realize you can also use one to buy a new home.

The program is called HECM for Purchase, and it lets buyers 62 or older purchase a new primary residence with a down payment and a reverse mortgage - with no required monthly mortgage payment on the new home.

How HECM for Purchase works

  • The buyer makes a down payment - typically 35 to 55% of the purchase price, depending on age and current interest rates
  • A reverse mortgage covers the remainder of the purchase price
  • The buyer owns the home from closing, with no required monthly principal or interest payment
  • The buyer remains responsible for property taxes, homeowners insurance, and maintenance
  • The loan balance grows over time as interest accrues

The down payment cannot come from another loan. It must come from the buyer's own assets - typically sale proceeds from a current home, savings, or a documented gift from family.

Why use this instead of a cash purchase

Many South Dakotans who consider HECM for Purchase could afford to buy the new home outright in cash. Using a reverse mortgage instead preserves that capital:

  • A full cash purchase removes a large sum from investments permanently. With HECM for Purchase, the buyer puts 35-55% down and keeps the rest invested.
  • No monthly payment means no cash-flow obligation in retirement - a meaningful difference on a fixed income.
  • Any unused portion of the HECM can be set up as a growing line of credit for future healthcare, home modifications, or emergencies.

Who this fits

  • Buyers 62 or older right-sizing into a smaller or more manageable home
  • Those moving closer to family in Sioux Falls or elsewhere in South Dakota
  • Buyers who want to avoid a monthly mortgage payment in retirement
  • Those selling a larger home and using the proceeds as the down payment on the next one
  • Buyers who want to preserve liquid assets rather than tie them up in a cash purchase
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For South Dakota realtors HECM for Purchase is one of the most underused tools in the senior buyer market. A buyer who cannot qualify for a traditional mortgage - or who does not want another monthly payment - may be able to purchase through this program. Jeff Buum is glad to connect with realtors who want to understand it better.

Related guides

HECM for Purchase explained - full guide How much can you get from a reverse mortgage in South Dakota? Is a reverse mortgage right for South Dakota homeowners? Reverse mortgage overview