Texas Reverse Mortgage Wholesale Loan Benefits

You are exploring your options in retirement planning tools, and you are checking out the pros and cons of a reverse mortgage.  Texas seniors, if you are confused by now, you are not the only one!  As you investigate further, you also come across the term reverse mortgage wholesale loan.  Now, you are really befuddled! What is the difference between a reverse mortgage loan and a Texas reverse mortgage wholesale loan?

Actually, for you the borrower, a reverse mortgage wholesale loan works exactly the same way.  However, for potential lenders, the difference can be monumental; and the savings can be passed down to you-the homeowner.  Here is how it works:

Without a reverse mortgage wholesale loan, your lender takes a greater risk in loaning you the equity in your home.  If you should default on the loan or the house is worth less at the time the loan is due and payable, the lender can suffer a great loss. His potential risks may also be passed along to the homeowner in higher than normal fees and interest.  Either way, it is an iffy situation for both parties involved.

Conversely, a reverse mortgage wholesale loan protects both the lender and the borrower.  For instance, a Home Equity Conversion Mortgage, or HECM, is financed by the Federal Government through the Federal Housing Authority. Meaning, you and the reverse mortgage lender are protected under the law, to make sure that both parties benefit, as expected, from the mortgage loan.

For you, a Texas reverse mortgage wholesale loan means the government is helping finance the lender, which keeps your costs down.  Why?  The lender is required to abide by the fees and interests rates within Federal guidelines.  If he/she has incurred unnecessary expenses, the cost cannot be passed to the borrower.

In return for offering reverse mortgage wholesale loans, the FHA also protects the lender. For clarification, suppose you outlive your loan or your home decreases in value, after the lender has already agree to give you money based upon the higher market value.  Now what?  The lender can be out a lot of money. So, the government guarantees the loan for the lender as well.  If you outlive the loan or your house decreases in value, the lender is guaranteed the amount you received based upon the original agreement.  If the lender incurs a loss, FHA makes up the difference.

So, do not let the word "wholesale" throw you for a loop. You could substitute the word "guaranteed" and it would mean the same thing. (It would also be a lot more comforting.)  So, if you are considering the possibility of tapping into your home equity, you want to make sure you have a reverse mortgage wholesale loan.