The reverse mortgage is a popular way to borrow money against the value of your home. The reverse mortgage is becoming more and more popular with older people who want to pay off their debts and make more money in retirement. As the Baby Boom generation gets older and closer to retirement, the reverse mortgage is likely to be used more and more.
In a reverse mortgage, there are no monthly payments, which is different from a regular mortgage.
The money can be taken out in a lump sum, as a monthly income, or as needed. Each month, interest is taken out of the home equity balance and added to the loan balance.
The most common reverse mortgage is the Home Equity Conversion Mortgage, which is insured by the federal government. This mortgage makes sure that a retired person can stay in his or her home until they die or move out. The retiree or his or her heirs own any remaining equity in the home. The lender gets none.
One good thing about reverse mortgages is that getting one doesn't depend on how much money you make. In fact, you can get one even if you don't make any money.
You will have to pay back the loan, though, either when you die or when the house is sold.
Reverse mortgages have some problems, and not everyone can get one. Even though the interest rates are similar to those of regular mortgages, the start-up costs are high. This is partly to insure the loan, which is riskier than a regular mortgage because the borrower must be at least 62 years old.
Also, since the reverse mortgage takes money from the home's equity, you could run out of equity if the value of your home goes down over time.
Reverse mortgages may become more popular in Texas, and they will soon be able to accept payments from a line of credit.
People in Texas who wanted a reverse mortgage or a loan against the value of their home had to wait a long time, because Texas was one of the last states to allow these kinds of loans. Mortgage laws from the 1800s banned this kind of lending because the state's founders were afraid that lenders would take advantage of people and steal their homes by foreclosing on them. This made it almost impossible for people in Texas to use their home equity for debt consolidation, home improvements, or other good reasons, like people in other states can. In 1997, the Texas legislature finally changed the state's constitution to allow home equity loans. However, they did it in a way that was awkward and didn't answer many questions. For home equity loans, the new laws did allow traditional term loans and lines of credit. They also let reverse mortgages pay out in one lump sum. But the law didn't let reverse mortgages have lines of credit, which has caused a problem. With a reverse mortgage, homeowners over 62 can borrow money against the value of their home as long as they agree to pay the money back when they die, sell the home, or move. In the past few years, reverse mortgages have become very popular, especially in places like California where high home prices have left many homeowners short on cash but "equity rich." Using the equity in their homes, these people have been able to pay for their retirements by buying vacation homes, recreational vehicles, or going on long-awaited trips. Nationwide, almost 90% of people who get a reverse mortgage do so with a line of credit. This gives them the freedom to use the money when and how they want, and no interest is added until the money is used. It's easy to use, and the homeowner pays much less in interest than with a lump sum payment. The only option for people in Texas is a lump sum payment, which means that very few reverse mortgages have been given out so far. This could change soon, though. A recent change to the state constitution in Texas means that homeowners who get a reverse mortgage will be able to get their money in the form of a line of credit. Texas law says that this change must be put on the ballot for a vote, which is likely to happen this fall. People who work in the lending business think the vote will pass, and they say that if it does, the state will offer a lot more reverse mortgages. Only California has more people than Texas, which has more than 20 million, and there are a lot of people in Texas who could get a reverse mortgage. By getting rid of laws that have been on the books for more than 150 years, Texas may soon have fair and equal home lending laws like the rest of the states. This could be interesting for people who are worried about California's variable pay. This information is about mortgagemastersonline.com, which is why we put it here.
