Texas Reverse Mortgage Loan For Senior Citizens

If you are age 62 or over, and you do not want to live out your golden years in abject poverty, you may want to consider a Texas reverse mortgage loan.  The loan can give you the money to pay off bills, take care of you living expenses comfortably, and even finance a nice vacation.  But, before you run to the nearest lender, you need to understand how a reverse mortgage works, the pros and cons, and how to ensure an unscrupulous lender does not take advantage of the fact that you are a senior citizen in need of some cash.

First, you need to understand how a reverse mortgage for senior citizens works.  For example, when you first buy a home, you have very little equity in the house.  Sure, you have the down payment, but the lien on the house is so large, most people have to take out a 20-30 year loan.  However, as time passes and you keep making payments, the amount of debt decreases and the equity on your home rises.

In contrast, a reverse mortgage establishes reverse equity in your home. For illustration, assume your home is worth $200,000 and it is paid in full.  You have $200,000 worth of equity to put into the reverse mortgage. Texas averages based on a scale of average longevity plus the value of your home, minus closing costs and fees, the lender will determine how much he can lend you during the balance of your expected lifetime. Then, it will be determined whether you get paid in a lump sum, a monthly check or a combination of both.

Unfortunately, a reverse mortgage is complicated, and seniors can be bamboozled by unscrupulous lenders or be ill-informed regarding the details.  If you have a television, you have probably already seen a commercial for obtaining a reverse mortgage loan. In fact, the backdrop shows a nice house, an expensive car, or some other aspect of comfortable living in your golden years. However, the advertisers only tell the advantages of a reverse mortgage, they do not tell both the pros and cons.

The pros are pretty obvious, but what about the cons. First, receiving a reverse mortgage loan requires closing costs and fees, just like any other mortgage loan. Typically, $8000-$9000 is rolled into the total balance of your loan which means even less for you today, and less for your heirs tomorrow.

When you pass away, or have to move out of your home for 12 consecutive months, it must be sold.  Therefore, your heirs have the option of paying of the loan and essentially buying back the house; or, the house is sold, the lender is paid in full, and if anything is left over, then the money goes to you or your heirs. However, the pro is this:  if you have a HECM (Home Equity Conversion Mortgage) and you outlive the value of your home, you will not be thrown out into the street, and your heirs will not have to make up the difference, since it is ensured by the Federal Government.

Another problem with reverse mortgages in Texas is the cost of living.  If you have made arrangements to get a monthly amount that barely covers your senior living expenses, and prices increase, you payments will still stay the same.  Also, if you have Medicaid or some other kind of government assistance, you will have to watch the balances in your checking and savings.  As a couple, if you have more than $3000 ($2000 single) in the bank, at the end of the month you could lose some of your benefits.

Finally, be careful who you select as the lender.  Unfortunately, some people are out to make a buck, even if they take gross advantage of you in the process. For this reason alone, most people choose HECM loans because the lender has to abide by government regulations meant to protect the interests of both the borrower and the lender. 

Because choosing the right Texas reverse mortgage lender, and all the other issues combined, can be so difficult, seniors are required to go to counseling.  Before you sign on the dotted line, you should have no doubt as to what you are getting in return.  Also, you must be comfortable with the lender, and know all the pros and cons of a reverse mortgage loan.

In sum, most of us are not actually financially ready to retire, when doing so. Many seniors live on a fixed income; with no extra to actual enjoy their final years.  As part of the answer, some seniors want the advantages of a reverse mortgage for senior home owners. While is sounds great and may be the right choice for you, still make sure you understand exactly how it works, and how your financial situation will change as a result. Finally, welcome the counseling process of just one more step to protect your finances, so you can live for many more comfortable and happy years.