A reverse mortgage is a loan for homeowners age 62 and over. This loan allows them to borrow against the equity in their homes. They can use this money to pay off their standard mortgage, use it as extra income each month, pay for healthcare expenses, or other various uses. However, it is different from a standard or “forward” mortgage, in that when a person uses a reverse mortgage to borrow money, they do not make monthly payments and the balance of the loan does not reduce each month. A borrower can receive proceeds from the loan and make no monthly payments. This causes the loan balance to increase monthly. This means the loan is acting in reverse of a standard forward loan, hence the name. Borrowers can also purchase a home using a reverse mortgage which allows them to avoid making monthly payments for as long as they live in the property. The official name of the reverse mortgage, that is backed by the Federal Housing Authority (FHA) is The Home Equity Conversion Mortgage loan, or HECM.

Benefits of Reverse Mortgage

Loans:

• No More Monthly Mortgage Payments: Part of your reverse mortgage loan amount will be used to completely pay off your existing mortgage on your home. Not only will you have money from the reverse mortgage, but you will have extra money every month not having to make that mortgage payment • You Own Your Home: You still own your home when you get a reverse mortgage. Even though you are borrowing against your home equity, you can do anything you want with your house and live there as long as you please. • Flexibility: With a reverse mortgage, you are only borrowing a portion of your home’s value. This leaves you with more financial flexibility for the future. • Cashback: Most reverse mortgage borrowers also get extra cash back .You can use this money any way you want. Per the Department of Housing and Urban Development (HUD), you may be eligible for a reverse mortgage loan if you fall into any of the following categories: • You (and your spouse if applicable) must be 62 years of age or older. • The borrower(s) must own the property outright or has paid down the mortgage by a considerable amount. • The borrower(s) must live in the property as their principal residence. • The borrower(s) must not be delinquent on any federal debt. • The borrower(s) must have the ability to continue making payments of ongoing property expenses: property taxes, insurance, homeowner association fees, etc. • The borrower(s) must participate in a consumer information session with a HUD-approved HECM counselor.

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THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV