Judging from calls to my Capitol and district offices, senior Texans are anxious to access this additional funding source that could make it possible for them to live out their retirement years in their own homes and, for example, finance in-home nursing care, if needed. Like a traditional home equity loan, a reverse mortgage uses home equity as collateral, only with a reverse mortgage the borrower receives a lump sum or monthly payments. Payment formulas are determined by a borrower's age, the house's value and interest rates. No money is paid back to lenders until the homeowner dies or sells the house. At that time, the loan and the interest must be repaid.
Any excess equity is returned to the owner or the owner's heirs.
Although borrowers may qualify for reverse mortgages at age 62, experts recommend waiting until age 67 or older. Because lenders place a lien on a house but never take title, a borrower retains control of the property and may sell at any time. Unless they fail to pay property taxes and insurance, borrowers can never be forced from their homes no matter how long they live. Loan closing costs can be financed into the reverse mortgage or paid at closing. Potential borrowers must attend a counseling class before receiving a reverse mortgage, so they and their families will be fully informed about the loan.