Table of Contents
- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
What is a Reverse Mortgage?
A reverse mortgage could be an excellent way to supplement your retirement income.
Let us first understand how reverse mortgage in Texas works. First, think of how your home mortgage works as you make monthly payments, the amount of equity in your home increases.
This equity is the money that is tied to the value of your home. A reverse mortgage allows you to borrow that money in payments made back to you.
As you receive cash payments, the equity in your home decreases gradually.
Also, the loan balance slowly increases over time. The reverse mortgage is repaid if the homeowners or the borrowers leave the house.
A reverse mortgage in Texas allows you to access the cash in your home while you still live in it.
Rules for Reverse Mortgage in Texas
There are some rules for reverse mortgages In Texas. The borrowers must be at least 62 years old. The property in question must be your primary residence. You must own your home and have substantial equity in your home.
You must have enough resources to keep up with the property taxes, insurance, and home owner’s insurance fees.
Many other rules also apply, make sure you understand them from your trusted mortgage advisor before you apply for a reverse mortgage In Texas.
Pros of Reverse Mortgage
The most significant advantage of getting a reverse mortgage is that you never have to make a payment.
To qualify for the reverse mortgage in Texas, you do not need to have a good credit score. You would have access to your home equity without leaving home.
You would be able to acquire that cash without selling the house. By doing so, you can add to your monthly income.
If you decide to take a line of credit while getting a reverse mortgage, it grows over time. The line of credit grows equal to the loan rate, plus 1.25%.
Over time you would have access to much more money. If you never have an emergency and do not need to take the money from the line of credit, then you haven’t borrowed those funds.
And your heirs have a much lower balance to pay off when they inherit your home.
Cons of Reverse Mortgage
The most significant disadvantage of getting a reverse mortgage is that it is expensive.
The closing cost on a reverse mortgage in Texas could be more than that on a traditional mortgage. So you must compare mortgage lender’s fees for the best deals.
You can disinherit your children from getting that home. Even if your heirs are inheriting the house, it comes with a lien that needs to be paid in full within six months—the balance on a reverse mortgage increases over time.
You will owe more on the mortgage in 10 years than you do after the first year.
Reverse Mortgage Refinancing
A lot of people do not know that they can refinance their existing reverse mortgage. The most crucial reason for reverse mortgage refinancing is that you might end up getting more money.
When you get a reverse mortgage, what it does is, it calculates how much you can borrow based upon your age, and it multiplies by the appraised value of the house.
If you already have a reverse mortgage for a few years and now the current value of the home is appraised, you can always get the existing reverse mortgage refinancing done and get more money.
It makes perfect sense to refinance a reverse mortgage because if you don’t borrow that money, it will end up going away anyway.
Since the reverse mortgage appreciation works on the principal balance, it is better to refinance your reverse mortgage.
Take that extra money in the form of cash or line of credit. It might be challenging to qualify for the reverse mortgage refinance as the parameters are too stringent.
However, you can always talk to your trusted mortgage advisor and see the numbers if it works in your favor.
Conclusion
Getting a reverse mortgage or a reverse mortgage refinancing could be one of the most crucial decisions you might have to take.
We always suggest you seek advice from your trusted mortgage advisor who can guide you better.
Since refinancing on a reverse mortgage comes with quite a challenge, you need to be assertive about whether or not you need to get it done. Eventually, every penny saved is a penny earned!
