Helpful Information On Reverse Mortgages

Helpful Information on​ Reverse Mortgages
A popular method of​ borrowing against your home is​ the​ reverse mortgage .​
The reverse mortgage is​ becoming increasingly popular among senior citizens who wish to​ pay off their debts and increase their retirement income .​
It is​ expected that as​ the​ Baby Boom generation moves towards retirement,​ use of​ the​ reverse mortgage will become more and more frequent.
Reverse mortgages differ from a​ traditional mortgage in​ that there are no monthly payments.
The funds can be paid out as​ a​ monthly income,​ taken as​ a​ lump sum or​ withdrawn as​ needed .​
Interest is​ charged each month and deducted from the​ home equity balance.
The most common reverse mortgage is​ the​ federally insured Home Equity Conversion Mortgage .​
This mortgage guarantees a​ retiree can remain in​ his or​ her home until he or​ she passes away or​ moves out .​
Any remaining equity in​ the​ home is​ the​ retiree's or​ his or​ her heirs .​
The lender gets none.
One advantage of​ reverse mortgages is​ that your ability to​ obtain one is​ not tied to​ your income .​
In fact,​ you​ can get one without any income at​ all!
You must,​ however,​ repay the​ loan upon your death or​ when the​ home is​ sold.
Reverse mortgages are not without their drawbacks,​ and they are not for everyone .​
While interest rates are comparable to​ conventional mortgages,​ there are high startup fees .​
Part of​ this is​ to​ insure the​ loan,​ which tends to​ be riskier than conventional mortgages,​ as​ the​ borrowers must be at​ least 62 years of​ age.
In addition,​ as​ the​ reverse mortgage draws upon the​ equity of​ the​ home,​ you​ could find yourself with no equity remaining if​ the​ value of​ your home should drop over time.
Reverse mortgages may become more popular in​ Texas and reverse mortgages will soon allow line of​ credit paymentsThose seeking a​ reverse mortgage or​ home equity loan in​ Texas were long disappointed,​ as​ Texas was one of​ the​ last states to​ allow such lending .​
Mortgage laws dating to​ the​ nineteenth century prohibited such lending,​ as​ the​ state’s founders feared that lenders would take advantage of​ people and intentionally seize their homes through foreclosure .​
This made it​ virtually impossible for Texans to​ use their home equity for purposes of​ debt consolidation,​ home improvement,​ or​ other legitimate uses,​ as​ citizens of​ other states may do.In 1997,​ the​ Texas legislature finally amended the​ state constitution to​ allow home equity loans,​ but did so in​ an​ awkward,​ poorly worded way that left many questions unanswered .​
The new laws did allow for traditional term loans and lines of​ credit for home equity loans,​ and also allowed for lump sum payouts for reverse mortgages .​
the​ law did not allow for a​ line of​ credit for reverse mortgages,​ however,​ and that has created a​ problem.A reverse mortgage allows homeowners who are at​ least 62 years of​ age to​ borrow against the​ equity of​ their home by agreeing to​ pay back the​ money when the​ homeowner dies,​ sells the​ home,​ or​ moves .​
Reverse mortgages have been quite popular in​ recent years,​ particularly in​ areas such as​ California,​ where high real estate prices have left many homeowners short of​ cash but equity rich .​
These people have been able to​ fund their retirements using the​ equity in​ their homes,​ purchasing vacation homes,​ recreational vehicles,​ or​ taking long-desired vacations .​
Nationally,​ nearly 90% of​ those who take out a​ reverse mortgage do so by utilizing a​ line of​ credit .​
This allows them to​ use the​ money when and how they see fit,​ and no interest accrues unless the​ money is​ actually used .​
It’s a​ very convenient product,​ and it​ costs the​ homeowner much less in​ interest than a​ lump sum payment .​
Unfortunately for citizens of​ Texas,​ a​ lump sum payment is​ the​ only option,​ and as​ a​ result,​ very few reverse mortgages have been offered to​ date.This may soon change,​ however .​
The Texas Legislature has recently approved an​ amendment to​ the​ state constitution that will allow homeowners who take out a​ reverse mortgage to​ accept payment in​ the​ form of​ a​ line of​ credit .​
Texas law requires that this change be placed on​ the​ ballot for a​ referendum,​ and it​ is​ expected to​ be voted upon this fall .​
Those who work in​ the​ lending industry expect the​ vote to​ pass,​ and say that it​ will lead to​ a​ tremendous increase in​ the​ number of​ reverse mortgages offered in​ the​ state .​
With more than twenty million people,​ Texas ranks second only to​ California in​ population,​ and there are many people in​ Texas who would qualify for a​ reverse mortgage.By eliminating laws that have been on​ the​ books for more than one hundred and fifty years,​ Texas may soon join the​ rest of​ the​ states in​ having fair and equitable home lending laws.This might be of​ interest to​ those concerned about California adjustable pay and that is​ why we have included this information.

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