Reverse mortgage loans are a popular financing option in Sun City, Texas, for senior homeowners to increase their cash flow.
The most popular type of reverse mortgage is the FHA-insured Home Equity Conversion Mortgage (HECM) loan. Unless noted otherwise, we’re referring to HECMs when we talk about reverse mortgages in the following article.
How Does a Reverse Mortgage Loan Work in Sun City, Texas?
A reverse mortgage loan allows 62 and older homeowners to access a portion of their home 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. As the money is the proceeds of a loan, it is tax-free.
No monthly mortgage payments are required for a reverse mortgage loan, instead, the homeowner must take care of property charges, such as taxes, insurance and home upkeep.
The loan payment is due when the homeowner sells the home, moves out or passes away.* The sale of the home covers the borrower’s loan balance, though their heirs have the option to buy the home at 95% of the appraised value.
People get reverse mortgages in Sun City, Texas, for many reasons, including:
Access To Home Equity
As great as home equity is, it is generally illiquid until the home is sold. HECMs allow eligible homeowners to convert a portion of their home equity into cash without having to sell their homes.
No Monthly Mortgage Payments
One of the primary benefits of a reverse mortgage is that borrowers are not required to make monthly mortgage payments. This can alleviate financial burdens for retirees on fixed incomes, providing financial flexibility and stability.
Flexibility in Loan Disbursement
HECM borrowers have a range of options for how they receive their loan proceeds. They can opt for a lump sum payment, regular monthly payments, a line of credit or a combination of these options.
Continued Homeownership
With a HECM, homeowners retain ownership of their home as long as they comply with the loan terms, which include living in the home as their primary residence, maintaining the property, and paying property taxes and insurance.
Government Insurance Protection
HECM loans are insured by the Federal Housing Administration (FHA). This guarantees that as long as the borrower meets their obligations, the lender will continue to make payments, even if the loan funds run out.
Non-Recourse Loan
The FHA insurance also makes HECMs non-recourse loans, which means that the borrower or their estate is not personally liable for repayment beyond the value of the home. If the loan balance is greater than the home’s value at repayment, the FHA insurance covers the shortfall, not the borrower or their heirs.
Interested in a Reverse Mortgage in Sun City, Texas?
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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.