You can use a reverse mortgage to purchase and buy a second home, but you should also investigate the use of a home equity line of credit (HELOC) or a second mortgage.

Q: We have a home that is fully paid for in Cape Coral, Fla. on the water. Both my wife and I are retired so we have limited income but very good equity in this property and two other homes.

The previous home we sold in Key Largo, Fl. has gone into foreclosure. We’d like to repurchase our old home! To do this we’d need to get a Reverse Mortgage (if it’s even possible) and some kind of financing to buy again the Key Largo house. We are certain the Key Largo place is a terrific location and ultimately will go up in value.

A: It’s great that you could be in retirement and considering buying a fourth home. If you are renting the other of your two homes, you may have income coming in from those properties as well as Social Security payments and income from other sources.

If you intend on buying the Key Largo home as an investment property, you may find it hard to find a lender willing to give you money to buy that home unless you put down a substantial amount of money towards its purchase. We’re not saying you can’t find a lender willing to do it for less, but many lenders now are quite cautious with real estate and many avoid loans to investors.

If you plan to use it as a second home, you may likewise find resistance from lenders with your plan unless you have enough sources of income to satisfy the ratios lenders use to determine whether you can carry your current home and carry the Key Largo home.

You might certainly have the ability to obtain a reverse mortgage. You should know, however, that reverse mortgages can have high fees and costs. You may also be surprised to find out that you might not get as much from a reverse mortgage as you might have thought.

Ilyce recently spoke with a woman in a similar situation on her radio show. The woman wanted to buy a property but didn’t know how to leverage her equity appropriately. Ilyce suggested she get a home equity loan on the paid-off property and use that to purchase the new home for cash. The woman followed the advice and secured a 10-year home equity loan at 3.5 percent and was able to purchase the property.

If you’re really intent on buying the Key Largo home, you should talk to a good mortgage broker in your area to discuss these issues and gain perspective about what options you do have for financing the purchase. You may also want to consider a community bank in your area or in Key Largo to see if they have any options available for you. Only by seeking this information will you be able to find out if your financial situation and the loan products that may be available to you can help you in your goal.

Be aware, however, that the costs might be too high or that you might have to liquidate some investments or find another source of cash to assist you in your project.

If you are able to buy the Key Largo home, please drop us a line and describe to us how you ended up going about financing the purchase.