Reverse mortgage loans are a popular financial solution in Plano, Texas, for senior homeowners to tap into their home equity.
The most popular type of reverse mortgage loan is the Home Equity Conversion Mortgage (HECM) loan. Unless stated otherwise, we’ll be referring to HECMs when we talk about reverse mortgage loans.
Understanding Reverse Mortgage Loans
Reverse mortgage loans offer homeowners aged 62 and above the chance to tap into their home equity without having to make monthly mortgage payments. Instead, the borrower simply has to pay property-related expenses such as insurance, taxes and maintenance.
Plano, Texas, seniors who want to stay in their homes while gaining extra financial flexibility may find reverse mortgages loans to be an excellent solution. The funds from a reverse mortgage loan can be used for virtually any purpose, such as home enhancements, medical bills or going on fun vacations.
Our Reverse Mortgage Loans in Plano, Texas
Home Equity Conversion Mortgages (HECMs)
HECMs are the only reverse mortgage loans insured by the Federal Housing Administration (FHA) and are the most common. It allows homeowners who are 62 years of age or older to convert a portion of their home equity into cash. Because the cash is considered loan proceeds and not income, it is tax-free.*
Borrowers can elect to receive their proceeds in several ways, including lump sum, line of credit and monthly payments. As the FHA insures them, HECMs are non-recourse loans, meaning the homeowners or their heirs will never owe more than the home’s market value at the time of sale.**
HECM for Purchase (H4P)
The H4P reverse mortgage loan allows seniors to purchase a new home using the equity from the sale of their previous home, which can greatly increase their buying power (sometimes up to 200%)!
The increased purchasing power enables many seniors to move to more expensive homes and areas than they could otherwise afford. The homeowner doesn’t need to make monthly mortgage payments on their new home. Instead, they just have to take care of property charges like taxes, insurance and upkeep. As a bonus, if the home’s value appreciates over time and exceeds the amount borrowed at the time of sale, the homeowners or their heirs may receive the remaining equity.
Jumbo Reverse Mortgage Loan
Jumbo reverse mortgage loans are designed for high-value homes. With a HECM, the FHA limits the amount that you can borrow against the home to $1,089,300. So for homes worth more than the FHA limit, a traditional HECM could leave a lot of money on the table.
With a jumbo reverse mortgage, the homeowner can borrow against the home’s total value, potentially significantly increasing their proceeds from a reverse mortgage loan.
Benefits of Reverse Mortgage Loans
Flexible Payments
Unlike traditional mortgages, monthly payments are not mandatory with reverse mortgage loans. Instead, the homeowner simply has to cover property-related expenses such as insurance, taxes and home upkeep. The loan balance becomes due when the homeowner sells the property, moves out or passes away.*
Borrowers can choose to receive their funds as a lump sum, line of credit, monthly payments or combination.
Benefit From Home Appreciation
Because of Plano’s real estate appreciation over the past few years, homeowners with reverse mortgage loans may be able to benefit from increased property values. As a home’s value rises, so does the available equity, potentially resulting in greater loan proceeds for the borrower.
Aging in Place
Reverse mortgage loans enable seniors to age comfortably in their homes without the obligation of monthly mortgage payments. They simply need to handle property-related expenses like taxes, insurance and maintenance. This is especially valuable in West Lake Hills, Texas, where the cost of living and housing prices might be higher compared to other regions.
Enhancing Retirement Finances
A reverse mortgage loan can serve as a steady source of cash flow for homeowners on a fixed income. Because the money from a HECM is considered loan proceeds, not income, it is generally tax-free. Many use their proceeds to protect their retirement assets in down markets and to cover unexpected expenses that arise over time.**
Secure Non-Recourse Loan
HECMs are the only reverse mortgage loans insured by the Federal Housing Administration (FHA). This makes HECMs non-recourse loans, meaning the borrower will never owe more than the home is worth at the time of sale.**
For example, suppose a borrower takes a reverse mortgage loan on their home when the housing market is high. The market is low when they pass away, but their heirs still wish to sell the property. In that case, the Mutual Mortgage Insurance Fund pays the remaining difference (administered by the FHA and financed via Mortgage Insurance Premiums paid by all borrowers). This offers great peace of mind to those concerned about passing debts onto heirs.
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*There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrower is still responsible for paying property taxes and insurance and maintaining the home. Credit subject to age, property and some limited debt qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change. **This advertisement does not constitute tax or financial advice. Please consult a tax and/or financial advisor regarding your specific situation.