Reverse mortgages are home loans available to seniors over the age of 62 that allow them to obtain cash through home equity they have created. Seniors are often in need of cash for a variety of expenses including home improvements, unexpected and urgent medical expenses, and in-home care. The reverse mortgage provides a valuable solution for seniors to acquire this much-needed cash.
The reverse mortgage gets its name because instead of the borrower making payments to a lender, the lender makes payments to the borrower. These mortgages do not have to be repaid until the borrower no longer occupies the home as their primary residence, unlike a more traditional home equity loan or second mortgage which are repaid monthly.
Many seniors and their families can be confused and overwhelmed when trying to obtain a reverse mortgage. Whether you are in Austin, San Antonio, or Corpus Christi, TerraVista Mortgage is here to provide local Texas seniors with the information and support they need throughout the reverse mortgage process. Let’s look at the reverse mortgage options available to seniors.
Home Equity Conversion Mortgage (HECM)
A Home Equity Conversion Mortgage (HECM) is a reverse mortgage that is backed by the Federal Housing Administration (FHA). The HECM is the only type of reverse mortgage that is federally insured and currently makes up the large majority of reverse mortgages in the United States. Seniors interested in a HECM must meet a few qualifications in order to apply.
HECM Borrowers must:
- Be at least 62 years of age
- Own their property outright or have a low mortgage balance
- Occupy the home as their primary residence
- Not be delinquent on any federal debt
- Have the ability to pay ongoing property charges such as property taxes, insurance and Homeowner Association fees, etc.
- Participate in a reverse mortgage information session given by an HECM counselor approved by the U.S. Department of Housing and Urban Development (HUD).
Lenders will also need to review a borrower’s income, expenses, and credit history. The FHA also requires the borrower’s property to meet specific standards and flood requirements.
Different payment plans are available depending on the needs of individual borrowers. The type of disbursement available will depend on whether a fixed or adjustable-rate option is selected. Fixed-rate reverse mortgages are available only as single disbursement lump sum payments. More options are available to the borrower with adjustable-rate reverse mortgages including:
- Line of Credit
- Term – equal monthly payments for a set number of months
- Tenure – equal monthly payments as long as one borrower occupies the property
- Modified Tenure – line of credit and tenure combination
- Modified Term – line of credit and term combination
Proprietary Reverse Mortgage
An alternative to the HECM is the proprietary reverse mortgage. These types of reverse mortgages are not insured by the federal government and as a result are far less common than HECMs. Proprietary reverse mortgages do not need to adhere to the same regulations as HECMs, although lenders typically follow the same standards as best practice. Proprietary Reverse Mortgages are common used when high-value homes are in the picture which is why they are often called jumbo reverse mortgages.
TerraVista Mortgage is committed to helping residents throughout the entire state of Texas with all their reverse mortgage needs, including Austin, San Antonio, Corpus Christi, Houston, Kerrville, Waco, Laredo, Lubbock TX, El Paso, Dallas and Fort Worth. The reverse mortgage process does not have to be complicated and confusing. Our goal is to educate our borrowers throughout the entire loan process so that they remain informed from start to finish. Contact us today for more information on reverse mortgages in Texas.