Reverse Mortgage Facts – Texas specific!

ü     Definition:  A reverse mortgage is a unique financial tool that enables homeowners ages 62 and over to tap into their home’s equity, receiving regular monthly income, a lump sum of cash or a combination of both.  There are no income or credit qualifications and there is no repayment until the homeowner permanently leaves the home.  The borrower retains 100% ownership of the property.

ü     Qualifications:  Applicant(s) must be at least 62 years of age and must own their home with a moderate to high amount of equity.  In many cases borrowers use the reverse mortgage to pay off existing liens or mortgages, which eliminates their monthly loan payments, but having an existing loan is not necessary.  Borrowers must also live in their home as their primary residence.  The property must meet FHA appraisal requirements, however most required repairs, if any, can be made after the fact (within six months of closing).   Mobile homes have specific requirements that must be met in order to be eligible for reverse mortgages, so please let us know if you have a mobile home so we can go through the checklist.  Commercial properties are currently ineligible for reverse mortgages. 

ü     Determination of Loan Amount:  The loan amount is based on the home value, the number and age of the homeowner(s), the current interest rate and the maximum allowable home value.  The maximum allowable home value varies depending on the reverse mortgage program selected.  The FHA-Insured Reverse Mortgage Program has limits, called Maximum Claim Amount.  This amount varies by county.  Harris and Montgomery County limits are both $625,000.  Fannie Mae Home Keeper program has a nationwide limit of $625,000.

ü       Counseling:  All borrowers are required to receive counseling from a third party counseling agency.  We will provide you with a list of counselors in your area and explain this in further detail.  The counselors often will be willing to do the counseling session over the telephone if you are unable to go to their office. 

ü     Payment Plans:  Reverse mortgage borrowers can choose from several payment plan options:  a)  Tenure:  Borrower(s) receive a monthly check for as long as they live in the home,  b)  Lump Sum Cash Advance:  Borrower(s) receive a lump sum of cash at closing, c)  Modified Tenure:  A combination of the Lump Sum and Tenure, d)  Line of Credit.

ü    Processing Time:  On average, it takes 4-8 weeks to process and close a reverse mortgage.

ü    Closing Costs:   The costs associated with a reverse mortgage are similar to a normal conventional loan such as the origination fee, appraisal, title policy, recording fees, etc.  Closing costs are financed into the loan.  We will be happy to provide you with a Good Faith Estimate of closing costs specific to your maximum claim amount when we meet with you.

ü    Interest Rate:  The interest rate charged is regulated by the Federal Government and varies by the reverse mortgage program selected by the borrower.  We will gladly keep you advised of the interest rates during the process.

ü    Impact on Income Taxes and Social Security:  Proceeds from a reverse mortgage are considered to be a loan, not income.  Therefore, the funds received are not subject to income tax and do not affect Social Security Benefits.  However, SSI and Medicaid benefits may be affected if your “liquid assets” exceed a certain level.  We recommend you consult your financial advisor, tax planner and/or attorney for further details.

ü    Repayment:  The reverse mortgage becomes due and payable at the time the borrower(s) leave the home.  If there are two borrowers, and one passes on, the loan is still not due.  When BOTH borrowers leave the home, the mortgage becomes due and payable.  The reverse mortgage can be repaid from the proceeds of the sale of the property, or other liquid assets.  The heirs can obtain a conventional mortgage to pay off the reverse mortgage if they wish to keep the home.  The amount due consists of the original loan balance plus any accrued interest.  All reverse mortgages are “non-recourse” loans which means regardless of the loan balance, the borrower(s) or their heirs can never owe more than the home is worth, even in the event the home decreases significantly in value.

AVERY's Office/Cell #281-812-7060

Equal Housing Lender

363 North Sam Houston Parkway #1100

Houston Texas 77060