Need some cash? If you own a home in Texas, you could be sitting on some easy money without even realizing it!
If you're a Texas homeowner, it's important to be aware of the different types of reverse mortgages available. A reverse mortgage allows you to access the equity in your home without having to sell it or take out a loan. You can use the money for any purpose - retirement, medical expenses, debt consolidation, and more.
To help you learn more, we'll cover 3 common types of reverse mortgages for Texas homeowners. We'll also provide tips on how to avoid reverse mortgage scams and how to get started on a reverse mortgage loan today.
What is a Reverse Mortgage Loan?
A reverse mortgage loan is a type of home equity loan that allows you to access the equity in your home without having to make monthly payments. The money you borrow can be used for any purpose, and you don't have to repay the loan until you sell or move out of your home.
There are three main types of reverse mortgages: Home Equity Conversion Mortgages (HECM), Single-Purpose Reverse Mortgages, and Proprietary Reverse Mortgages.
Home Equity Conversion Mortgages (HECM)
A Home Equity Conversion Mortgage (HECM) is a type of reverse mortgage that's insured by the federal government via the Federal Housing Administration (FHA). HECMs are available to homeowners who are 62 years of age or older and have equity in their home.
Home equity conversion mortgages come with several features, including:
- No monthly payments are required
- Borrowers can access a lump sum of cash, a line of credit, or monthly payments
- Borrowers are responsible for paying property taxes and insurance
- The loan balance is due when the borrower dies, sells the home, or moves out
Single-Purpose Reverse Mortgages
A Single-Purpose Reverse Mortgage is a type of reverse mortgage that can only be used for a specific purpose - usually repairing or improving your home. Single-purpose reverse mortgages are offered by local government agencies and non-profit organizations, not the federal government.
Some examples of expenses that could be covered by a single-purpose reverse mortgage include:
- Home repairs or improvements
- Pay property taxes
- Medical expenses
Proprietary Reverse Mortgages
A Proprietary Reverse Mortgage is a type of reverse mortgage that's offered by private lenders. Proprietary reverse mortgages are usually more flexible than other types of reverse mortgages, but they may have higher interest rates and fees.
Some features of proprietary reverse mortgages include:
- Borrowers can access a lump sum of cash, a line of credit, or monthly payments
- Borrowers are responsible for paying property taxes and insurance
- The loan balance is due when the borrower dies, sells the home, or moves out
How Can a Reverse Mortgage Benefit Me?
There are many ways a reverse mortgage can benefit Texas homeowners. Some of the most common benefits include:
- Accessing the equity in your home without having to sell it or take out a loan
- No monthly payments are required
- Use the money for any purpose, including retirement, medical expenses, debt consolidation, and more
Alternatives to a Reverse Mortgage
If you're not sure if a reverse mortgage is right for you, there are several alternatives to consider. Some alternatives to reverse mortgages include:
- Home equity loans (HELOC)
A home equity loan is a type of loan that allows you to borrow against the equity in your home. Home equity loans typically have fixed interest rates and monthly payments.
- Cash-out refinance
A cash-out refinance is a type of mortgage loan that allows you to borrow against the equity in your home. With a cash-out refinance, you can receive a lump sum of cash, which can be used for any purpose.
- Reverse annuity mortgage (RAM)
A reverse annuity mortgage (RAM) is a type of reverse mortgage that allows you to receive monthly payments from your home equity. With a RAM, you make no monthly payments and the loan balance is due when the borrower dies or moves out of the home.
Requirements for a Reverse Mortgage
To qualify for a reverse mortgage, Texas homeowners must:
- Be 62 years of age or older
- Own a home
- Have equity in their home
- Occupy the home as their primary residence
Reverse Mortgages for Texas Home Buyers
If you're a Texas homeowner who is 62 years of age or older and has equity in your home, you may be eligible for a reverse mortgage. Reverse mortgages can provide you with many benefits, including access to cash, no monthly payments, and the ability to use the money for any purpose.
Reverse mortgages are available regardless of the type of mortgage you initially used to buy the home. So whether you have a traditional mortgage, FHA, USDA, or VA loan, you may be eligible. However, the VA and USDA do not offer their own reverse mortgage loans.
Do Reverse Mortgages Have Fees and Closing Costs?
Reverse mortgages differ from other types of home equity loans in a number of ways. Perhaps the most important one is the higher cost. Fees for these loans include mortgage insurance premiums, both initial and annual, along with third-party fees for closing costs, a loan origination fee that is capped at $6,000, and a loan servicing fee.
How to Avoid Reverse Mortgage Scams
When considering a reverse mortgage, it's important to beware of scams. Some common signs of a reverse mortgage scam include:
- Promises of "free" money from the government
- High-pressure sales tactics
- Guarantees of low interest rates or no monthly payments
- Requests for personal information before you've had a chance to learn about the program
If you're considering a reverse mortgage, be sure to do your research and work with a reputable lender.
Get Started on a Reverse Mortgage
If you're interested in learning more about reverse mortgages, we can help. Contact Texas United Mortgage today to get started. We'll help you determine if a reverse mortgage is right for you and answer any questions you have. Call us toll-free at(888) 505-1718 or fill out our online form.
