The basic requirements to qualify for a reverse mortgage loan include: the youngest borrower on title must be at least 62 years old, live in the home as their primary residence and have sufficient home equity. Borrowers must also meet financial eligibility criteria as established by HUD.
What is a Reverse Mortgage?
Simply put, a reverse mortgage is a loan that allows Texan’s aged 62 or older to tap into the equity that’s been built up in their home. The homeowners can then use the proceeds in a variety of ways – such as covering monthly living expenses, making improvements to the home or paying for prescriptions and health care.
Benefits of a Reverse Mortgage:
- The borrower continues to own and live in the home – even if one of the co-borrowers passes away. Of course, the homeowner must continue to pay property taxes, have homeowners insurance and maintain the home-but the proceeds from the reverse mortgage can be used to pay for these routine expenses.
- No repayment is required until the borrower sells the house or does not live in the house for more than 12 months. When the house is sold, the loan is repaid along with accrued interest. If the borrower leaves the house for more than 12 months, such as for a stay at a nursing facility, then the loan becomes due.
- There are no monthly payments required. Although there are no monthly mortgage payments, interest accrues on the portion of the loan amount that is disbursed. And while the funds received from a reverse mortgage do not impact Social Security or Medicare benefits, certain needs-based benefits, such as Medicaid and Supplemental Security Income (SSI) may be affected. Prospective borrowers should contact their tax professional about their specific situation.
- A prospective borrower can still qualify, even if he or she is still paying on a conventional mortgage. The proceeds from the reverse mortgage will be used to first pay off the existing mortgage.
- Closing costs can be rolled into the reverse mortgage itself, so there’s no immediate financial impact to contend with.
- Borrowers have a choice of how they receive their proceeds, based on their needs and preference. They can choose a single lump sum, monthly income for as long as they live in the home, or, if they prefer, for a specified period of time, a line of credit they can draw on as needed, or any combination of these options. A line of credit option, used wisely, help make loan proceeds available while serving to protect home equity. Texans should understand the growth to the line of credit on funds not withdrawn from the reverse mortgage.
A reverse mortgage may make all the difference helping Texas seniors live better today while being better prepared for the future.