Title:
Helpful
Information On Reverse Mortgages
Word Count:
815
Summary:
Helpful
information on reverse mortgages: advantages & disadvantages.
Keywords:
reverse mortgage,
mortgage, home loan,home equity, home loan equity, home buying, mortgage
refinance
Article Body:
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The funds can be paid out as a monthly income, taken as a lump sum or withdrawn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
mortgagemastersonline.com and that is why we have included this information.