The Disadvantages of a Reverse Mortgage in Texas

Home Value

Reverse mortgages are offered based on how much equity is in the house, or how much value it currently has on the market minus any other associated debts. This is where a Texas-based reverse mortgage may be different based on location. A house in a more active market, such as Dallas/Forth Worth, where house prices tend to be higher, will be able to qualify for a higher reverse mortgage amount. Houses in areas where the market is slower will not quality for the same amount. This varies considerably by time as well, making the amount difficult to determine.

The final payments of a reverse mortgage can be very large. If a borrower dies, the mortgage payments can be a substantial part of estate debts. The house must be sold to satisfy the mortgage, and there could be leftover debt that must be paid in other ways. This amount of the remaining debt will depend partly on the housing market in the area in Texas in which the house is located. Also, the final payment will be higher than the total of a conventional mortgage, because the compound interest tends to build on itself over time.

Immediate costs also apply to Texas reverse mortgages. While the debts are delayed, lenders still charge for application fees, closing costs, insurance, appraisals, credit checks and a number of other activities that can cost several thousand dollars or more. This makes starting a reverse mortgage more difficult, especially for those with a low income who may be most attracted to reverse mortgages in the first place. Costs may also be incurred in repairing a home so that it can qualify for the mortgage.

Reverse mortgages are designed for elderly homeowners who have both low debt and low income. Federal rules for Department of Housing and Urban Development (HUD) reverse mortgages restrict application to those age 62 or older. This limits the amount of time a reverse mortgage can be used, but also restricts the amount the homeowner can borrower. Usually the older a homeowner is, the more he can borrower, which can make it difficult for younger owners to borrower as much as they want.