Reverse mortgage loans are a popular financing option in Austin, Texas, allowing 62 and older homeowners to tap into their home equity.
How Does a Reverse Mortgage Loan Work in Austin, Texas?
A reverse mortgage loan allows homeowners, aged 62 or older, to access a portion of their home’s equity without selling their home. The homeowner can choose to take their payout as a lump sum, monthly payments, a line of credit or a combination.
No monthly mortgage payments are required for a reverse mortgage, instead, the homeowner must take care of property charges, such as taxes, insurance and home upkeep.
The loan is paid when the homeowner sells the home, permanently moves out or passes away.* The sale of the home covers the borrower’s loan balance, though their heirs will have the option to buy the home at 95% of the appraised value if they so choose. If the home’s value exceeds the loan balance at the time of sale, the homeowner or their heirs get to keep the profits. If the loan balance exceeds the value of the home, the FHA pays the difference.
People get reverse mortgages in Austin for many reasons, including:
Access To Home Equity
HECMs allow homeowners to tap convert a portion of their home’s equity into cash. Because the money is considered proceeds from a loan, it is tax free.
No Monthly Mortgage Payments
One of the primary benefits of a reverse mortgage is that borrowers are not required to make monthly mortgage payments again. Instead they simply have to take care of property charges, like taxes, insurance and home upkeep. This can alleviate financial burdens for retirees on fixed incomes, providing more financial freedom.
Flexibility in Loan Payouts
HECM borrowers have flexibility in choosing how they receive their loan proceeds. They can opt for a lump sum payment, monthly payments, a line of credit, or a combination of these options.
Continued Homeownership
With an HECM, homeowners retain full ownership of their home just as they did before the reverse mortgage. They simply have to comply with the loan terms, which includes living in the home as the primary residence, maintaining the home, and paying property charges.
Government Insurance Protection
HECMs are insured by the FHA which provides safeguards for borrowers, including a guarantee that the lender will continue to make payments even if the loan funds run out.
Non-Recourse Loan
FHA insurance makes HECMs non-recourse loans. This means that the borrower or their heirs are not liable for repayment beyond the value of the home when it is sold. If there is still a balance after the sale of the home, FHA covers it.
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*This advertisement does not constitute tax or financial advice. Please consult a tax and/or financial advisor regarding your specific situation.