Many seniors in Frisco, Texas, use reverse mortgage loans to increase their cash flow while remaining the full owners of their homes.
How Does a Reverse Mortgage in Frisco Work?
Homeowners aged 62 or above in Frisco, Texas, should pay serious attention to reverse mortgage loans. This type of loan allows borrowers to access a portion of their home’s equity without selling the property or making monthly mortgage payments. Instead, borrowers are responsible for property-related expenses, like taxes, insurance and maintenance. It’s important to note that cash obtained from a reverse mortgage loan is tax-free because it’s considered loan proceeds, not income.*
The loan amount available to borrowers depends on several factors, including the borrower’s age, the property value and interest rates. Repayment of the loan is generally due 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 buy the property. If the heirs decide to sell it, they will receive any remaining equity after clearing the loan balance.
Our Reverse Mortgage Loans in Frisco, Texas
Home Equity Conversion Mortgages (HECMs)
HECMs are the most popular type of reverse mortgage loan and are the only one backed by the Federal Housing Administration (FHA). They offer homeowners aged 62 or older the opportunity to access a portion of their home’s equity as a lump sum, line of credit or monthly payments.
One of the most significant benefits of HECMs is that they are non-recourse loans, meaning neither the borrowers nor their heirs will be held accountable for any amount exceeding the property’s market value at the time of sale.** The non-recourse feature can provide peace of mind to borrowers concerned about passing on debt to their loved ones.
HECM for Purchase (H4P)
H4Ps are a type of reverse mortgage loan designed for seniors who are interested in purchasing a new home. H4Ps allow them to use the equity from the sale of their previous home to increase their purchasing power, which is sometimes up to 200% higher than without an H4P.
The increased purchasing power can allow seniors to move to more expensive areas and homes that would otherwise be beyond their financial means. Unlike traditional mortgages, H4P borrowers are not required to make monthly payments on their new home. Instead, they are responsible for property charges such as taxes, insurance and home maintenance expenses.
Also, if the home’s value appreciates over time and exceeds the amount borrowed, homeowners or their heirs may receive any remaining equity after the home is sold. This potential for equity growth can be an attractive incentive for seniors who want to invest in a new home.
Jumbo Reverse Mortgage Loan
Jumbo reverse mortgage loans are for homeowners with high-value properties. With the most common type of reverse mortgage loan, the HECM, the FHA sets a borrowing limit of $1,089,300. With a jumbo reverse mortgage loan, homeowners can borrow against the entire value of their property, enabling them to receive significantly more proceeds than what they could get with a HECM.
Frisco Reverse Mortgage Loan Benefits
No Monthly Mortgage Payments
One of the most appealing aspects of a reverse mortgage loan is eliminating monthly mortgage payments. This feature can be particularly beneficial for retirees who still carry a traditional mortgage balance, as it can help improve their cash flow and may even enable them to retire comfortably.
For homeowners who own their homes outright, a reverse mortgage loan offers a way to access their home equity without taking on a loan that requires monthly payments. Instead, they are only responsible for property-related expenses, such as taxes, insurance and upkeep costs.
Access To Cash and Home Equity Gains
Having a substantial amount of home equity can provide peace of mind, but accessing it typically requires either selling the home or taking out a new loan with monthly payments. Even though home equity recently reached new heights, for most homeowners the increase in home equity only translates to higher property taxes.
Reverse mortgage loans enable homeowners to access a portion of their home equity without the obligation of monthly mortgage payments. Instead, borrowers are responsible for property-related expenses such as taxes, insurance, and home upkeep costs, providing financial flexibility for homeowners looking to access their equity while continuing to own and live in their homes.
Buffer Strategy and Portfolio Hedging
Using a reverse mortgage as a financial buffer can be a smart financial strategy for many retirees.* Reverse mortgage loans allow retirees to tap into their home equity to cover unexpected expenses or to supplement their retirement cash flow in down markets. This financial buffer can help them avoid selling off investments at a loss or depleting their nest egg, which can help make those assets go much further.*
Owning the Home
One common misunderstanding is that taking out a reverse mortgage loan changes the borrowers’ ownership status. In reality, reverse mortgage loan borrowers retain full ownership of their homes, just as they did before taking out the loan. As long as the borrowers abide by the loan terms, they have complete control over their homes and cannot be coerced into leaving or selling their property.
FHA-Insured With Non-recourse Feature
Home equity conversion mortgages (HECMs) are insured by the FHA and provide added security for homeowners and their heirs. As non-recourse loans, borrowers and their heirs are not responsible for any outstanding loan balances beyond the home’s value at the time of sale.
For instance, if a homeowner takes out a HECM when the housing market is at its peak but sells their home years later when the market has declined, neither the homeowner nor their heirs will be required to pay the difference. Conversely, if the property’s value appreciates further over time, the homeowner or their heirs will be entitled to any remaining equity after the sale of the home settles the loan.
Long-term Care (LTC)
Although someone may have funds set aside for long-term care, it’s impossible to know if it will be enough. The proceeds from a reverse mortgage loan can be applied to any aspect of LTC that a borrower sees fit, from making home modifications for aging in place to paying for in-home care. Reverse mortgage loan proceeds can also be used to fund life insurance plans that provide coverage for LTC expenses, offering added financial security and peace of mind.*
Flexibility
Borrowers can receive their loan proceeds in a lump sum payment, monthly payments, a line of credit or a combination. Most importantly, borrowers can use their proceeds however they like.
Interested in a Reverse Mortgage Loan in Frisco, 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.