Many seniors in Arlington, Texas, use reverse mortgage loans to increase their cash flow while remaining the full owners of their homes.
How Does a Reverse Mortgage Loan Work?
In Arlington, Texas, homeowners who are 62 or older can use a reverse mortgage loan to convert a portion of their home’s equity into cash, enabling them to benefit from their equity without selling the property or taking out a loan that requires monthly payments. Instead, the borrower is responsible for property-related expenses such as taxes, insurance and maintenance, and any cash received is tax-free as it’s considered loan proceeds, not income.*
The loan amount is determined based on several factors, including the borrower’s age, the property’s value and the prevailing interest rates at the time of the loan. Generally, the loan is due and payable when the borrower moves out of the home, sells the property or passes away. If the borrower passes away, their heirs have the right of first refusal to purchase the property. If they opt to sell it, any remaining equity will go to them after settling the loan balance.
Our Reverse Mortgage Loans in Arlington, Texas
Home Equity Conversion Mortgages (HECMs)
HECMs are the most popular form of reverse mortgage loan and are the only type insured by the Federal Housing Administration (FHA). HECMs are non-recourse loans, which means there is no liability for an amount exceeding the home’s value when sold, ensuring that the borrower will not pass debt from their HECM to their heirs, as the home sale will cover the loan balance.** HECM borrowers may choose from various payment options, including a lump sum, a line of credit, monthly payments or a combination.
HECM for Purchase (H4P)
H4Ps are a specific type of reverse mortgage loan created for seniors who wish to purchase a new home, allowing them to use the equity from the sale of their current residence to increase their purchasing power, sometimes up to twice as much, while preserving other assets.*
Using an H4P enables many homeowners to relocate to more expensive areas or homes that would have otherwise been out of their budget. Unlike conventional mortgages, H4P borrowers are not required to make monthly payments on their new property. Instead, they need to pay for property-related expenses such as taxes, insurance and home maintenance.
Another advantage of the H4P is that if the home value increases over time and exceeds the borrowed amount, the homeowners or their heirs may receive the remaining equity when the property is sold. The additional buying power and potential for equity growth make H4Ps an excellent option for seniors looking to invest in a new home.
Jumbo Reverse Mortgage Loan
Jumbo reverse mortgage loans are designed for homeowners with high-value properties. The Federal Housing Administration (FHA) limits the amount that can be borrowed through a Home Equity Conversion Mortgage (HECM) to $1,089,300. A HECM may not be able to access the full home equity for properties with values above that threshold.
With a jumbo reverse mortgage loan, homeowners can borrow against their entire property value, enabling them to receive significantly more loan proceeds than they could with a HECM.
Reverse Mortgage Loan Benefits
Access to Cash
Although having a considerable amount of home equity can be comforting to many older homeowners, it’s illiquid and can’t be accessed without selling the home or refinancing with a loan that requires monthly payments.
A reverse mortgage loan provides a solution. Homeowners can tap into a portion of their home equity without the burden of monthly mortgage payments. Instead, the borrower is responsible for property-related expenses, such as taxes, insurance and home upkeep.
Realize Home Equity Gains
Home equity has reached new heights recently. However, for many homeowners, this increase in equity only results in higher property taxes. A reverse mortgage loan offers an alternative solution that allows homeowners to access their home equity while still retaining ownership of their property. By obtaining a reverse mortgage loan, borrowers can continue to own and reside in their homes while also benefiting from the appreciation of their property value, particularly in rapidly growing markets like Arlington.
Buffer Strategy and Portfolio Hedging
Incorporating a reverse mortgage loan into a retirement cash flow strategy can benefit many retirees. During market downturns or when dealing with unforeseen expenses, homeowners can use their reverse mortgage loan proceeds as an alternative to selling at a loss or spending their savings.*
Owning the Home
There is a widespread misconception that reverse mortgage loans alter the homeowner’s status as the sole owner of their home. In actuality, borrowers of reverse mortgage loans retain complete ownership, just as they did before receiving the loan. As long as they adhere to the loan’s terms, they maintain full control of their home and cannot be compelled to leave or sell their property.
FHA-Insured With Non-recourse Feature
Home equity conversion mortgages (HECMs) are backed by the FHA, which offers added layers of security for consumers. As non-recourse loans, the reverse mortgage loan balance will be satisfied by the home’s sale.
For example, if a homeowner obtains a HECM when the real estate market is at its pinnacle but sells their property years later when the market has cooled, neither the homeowner nor their heirs will be obligated to pay the shortfall. Conversely, if the property’s value increases over time, the homeowner or their heirs will receive any remaining equity once the home is sold and the loan is settled.
Long-term Care (LTC)
The need for LTC can be difficult to anticipate, which means it can be impossible for someone to know if they have enough funds to cover their eventual needs. The proceeds from a reverse mortgage loan can help pay for any costs associated with LTC, from paying for home modifications to hiring in-home caregivers.
Additionally, many seniors use their reverse mortgage loan proceeds to fund life insurance policies that cover long-term care expenses, providing added financial security and peace of mind.
Financial Flexibility
Borrowers can receive their loan proceeds in many different ways, including a lump sum payment, monthly payments, a line of credit or a combination of these options. Equally importantly, borrowers are free to use the loan proceeds for nearly any purpose they desire.
Interested in a Reverse Mortgage Loan in Arlington, 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. **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.