Reverse Mortgages

Reverse Mortgages are a way for senior Texans to receive a loan against their home that does not have to be paid back until the home is no longer used as his or her primary residence. Basically, the equity in the senior’s home is being converted into cash until he or she moves, sells the home or becomes deceased.

The home must be a single-family home or a one-to four unit home where the borrower actually lives. HUD-approved condominium or manufactured homes meeting FHA guidelines may also be eligible.

Who is eligible for a Reverse Mortgage?

Reverse mortgages are for individuals that are 62 years old or older and own a home outright or have a low loan balance and do not have any liens against the home.

Note that the borrower is still responsible for property taxes, property insurance and general upkeep of the home. Failure to do so could result in foreclosure.

The younger the borrower is, the less money they are eligible to receive since a life expectancy factor is considered in the loan payment formula.

If you are a senior that relies on public assistance programs, it is recommended you review the possible impact a reverse mortgage payout may have on these benefits first.


How does a Reverse Mortgage work?

If eligible, the borrower with have different payment options to choose from:

1)      a lump sum cash payout

2)      equal monthly payments for as long as borrower lives in home

3)      equal monthly payments over a specified time period

Repayment is not due until borrower(s) moves, sells the home, or is deceased. At that time, the heirs of the borrower may pay the lien off to keep the property. Alternatively, the lender may foreclose on the property.

A reverse mortgage, like other loans, does accrue interest charges that are due once the first payment is made to the borrower. Often the rate is an Adjustable Rate Mortgage (ARM) with interest compounded monthly.

Note that reverse mortgages tend to have high closing costs and is not a good idea for those that plan to move in the next couple of years or if you are seeking quick money for a temporary emergency.

What other alternatives are there besides a Reverse Mortgage?

Reverse Mortgages tend to be complicated and expensive and may not be the best option for seniors. Other options to consider include:

1)      Consider taking out a home equity loan

2)      Lower expenses by moving to a smaller home or apartment

3)      Seek a reduction or property tax credit on your home because of your senior status

Foreclosure – To Buy or Not To Buy?


Foreclosed homes are homes in which the owner was unable to pay for and the Lender has taken back.

The legal steps to foreclose on a home vary from state to state thus the time for the actual eviction, foreclosure and going to auction (if necessary) varies also. When a finance company or a real estate agency purchases a property at auction and it is being re-sold, this is referred to as real estate owned (REO).

If you are looking to buy a foreclosed property to flip, be sure to check the home sales for that area. If homes are not selling, odds are you will not be able to sell very quickly after the makeover either.

Advantage of Purchasing a Foreclosed Home

The only advantage of purchasing a foreclosed home that I can think of is that the price is usually discounted.

Risks of Purchasing a Foreclosed Home

Risks of purchasing a foreclosed home include the condition of the home. If the previous owner was evicted, he/she may have taken their frustrations out on the house. Another risk is that many people are trying to buy foreclosed homes which lowers the probability of finding a good deal. You will definitely have to move very quickly on the better deals. The home may have liens on it (ex. unpaid taxes) which poses another risk. Inquire about any potential liens and find out who is responsible for paying them.

Things to Consider When Buying a Foreclosed Home

When buying a foreclosed home, be sure to have all of your financing in order .. especially if the property is already at auction and you plan to bid. Many auctions require payment in full within 24 hours. For REO homes, you can get regular financing.
Foreclosed homes are sold ‘as is’ which means that if you find any problems, repairs will not be made. For properties that are already at auction, you will not have an opportunity for a proper inspection beforehand to determine if there are any major problems and you could end up with a bad deal.  For REO homes, you can schedule a proper inspection.
There is usually more paperwork when buying a foreclosed home because a government agency is involved.

In summary, buying a foreclosed home can be risky. If you decide you want to buy a foreclosed home in Central Texas and do not want to pay too much, be sure to contact your real estate agent to make sure the asking price is comparable to other homes in the area.