Questions and Answers

Basic Questions

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What is a reverse mortgage?: A reverse mortgage is a loan against your home that doesn't have to be repaid until the last borrower leaves the property for 12 consecutive months, sells the home, or dies. The homeowners must be 62 or older, and the home must be the primary residence. Many factors affect the amount of money available to the homeowners, including value of the home, existing mortgage on the home, condition of the home, age of the youngest spouse, and interest rate at the time of closing. However, a reverse mortgage will normally give the borrowers access to between 35% and 60% of the equity in their home without having to leave their property, or repay the loan during their lifetime.
When did reverse mortgages become available in Texas?: The first reverse mortgage loan was funded in Texas on January 2, 2001.

I am older than 62, but my wife will not be 62 for several years. Can we do a Reverse Mortgage loan on our home?: Yes. However, your "under-age" spouse will be required to sign a waiver of homestead rights. If you decease before she does, the reverse mortgage loan will have to be paid off which may require her to sell the home and find other living arrangements. There may be other mortgage options that make more sense.
My home is worth $250,000. I understand that it is worth too much to get a reverse mortgage. Is that true?: No, but here is how it works. The FHA sets a maximum loan value for each county in the United States. For example, in all Texas counties the maximum loan value is $200,160. This means that your $250,000 home will be treated for FHA reverse mortgage calculations as if it were worth $200,160. You would receive a portion of that maximum loan value, based on your age and current interest rate.
Proprietary reverse mortgage loans are now available for homeowners of high value homes in Texas, and would would use the entire value of your home, possibly giving you more money.

When my reverse mortgage is complete, can I get my money in the form of a line-of-credit?: Yes.
We still owe a small amount on the mortgage of our home. Is it possible to pay off that balance with a reverse mortgage?: If you have a substantial equity in your home and the remaining balance is relatively small, you may be able to pay off your remaining balance with a reverse mortgage.
I want to pay off my home equity loan and stop the payments. Can I do that with a reverse mortgage?: Yes. Texas homeowners may pay off a home equity loan with a reverse mortgage.
For people not yet 62 years of age, there may be a way for you to access other funds owned by you including retirement accounts. If you pay off the home equity loan from these funds, then you may do a reverse mortgage when you reach 62 and replace those funds. This is very tricky and requires careful cordination between our senior loan officer and your financial advisors.
Our home is in a revocable living trust. Can we get a reverse mortgage on it?: Yes. However, the trust will have to be reviewed during the process.

Is it true that the lender gets my home after I am gone?: No. A reverse mortgage is just like any other loan in that you retain the title to your home. The lender doesn't want title to your home because they would then become responsible for taxes, insurance, maintenance and selling the property. In Texas, your reverse mortgage can not be foreclosed without a court order. A reverse mortgage is likely the safest kind of mortgage available to seniors in Texas.
If I have a reverse mortgage and want to sell my home, what happens?: It is like any real estate transaction. At closing, any outstanding loans will be paid off, including the reverse mortgage loan.
What if my heirs don't have the money to repay the reverse mortgage balance?: If your heirs want to keep your home after you are gone, they can either pay off the loan balance, or they can get another mortgage on the home to pay off the balance. In most cases, the remaining equity in the home will be more than enough to make the down payment.
If they do not want to keep the home, they can sell it, pay off the balance, and keep the difference. Remember, you and your estate retain title to the home and to all remaining equity in the home.