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The Reverse Mortgage Loan

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Home equity and reverse mortgages were added to the Texas constitution in 1997.  The lists of consumer safeguards were extensive. The Texas version conflicted with the rest of the United States. The Federal Housing Administration took issue with the changes and refused to insure these loans. With that, Fannie Mae would not make a market for these Texas home loans.  As a result, very few reverse mortgages were originated in Texas until 1999.

On November 2, 1999 Texas voters approved the constitutional amendments that allowed Texas seniors (over the age of 62) to obtain a reverse mortgage.  Reverse mortgages allow senior citizens to take out a loan secured by the equity in their home without having to repay the loan until they move or die, so long as they comply with the loan terms. 

Seniors are now able to afford the high cost of private medical care and unsubsidized portions of needed medicines. They are able to make repairs and renovations to their homes therein improving living conditions and real estate values. They can set up trusts and lump sum investments for themselves or future generations. The myriad of options seems endless. Though they must continue to pay for property taxes, insurance, and associated maintenance costs, senior homeowners can now rest assured knowing that they cannot lose their home for failing to make a monthly mortgage payment,

With all this, why hasn't every eligible borrower candidate chosen to take advantage of this incredible financing medium?  The answer lies in the fact that the reverse mortgage concept is not only foreign to many, but is opposite of traditional financing modes.

In a traditional home equity refinance mortgage set up, a borrower would either refinance the balance that is owed or create a second mortgage and would elect to draw up to 80% of the value under Texas law.  The loan would require regularly amortizing monthly mortgage payments which decreases the accrued interest over time.  As such, the borrower would be required to qualify for the new loan, showing stability of income, good credit history, and a host of other loan requirements.

The reverse mortgage is different in that seniors can access between 20% - 35% of their equity (based on the appraised value) depending on their age.  The proceeds can be received as lump sum, monthly payment, a line of credit, or some combination thereof.  The big news is that there are minimal income and credit requirements. The loan is essentially collateral (property) based. 

So when is the loan repaid?  The loan must only be repaid once the last remaining borrower, eligible non-borrowing spouse, or co-borrower dies or chooses to move out of the home for over 12 months, or fails to comply with the loan terms.  At that point the estate or guardian has the task of selling the real estate in order to repay the debt.  The non-recourse nature of this mortgage provides the basis that the Lender can only satisfy their debt with the home and not other assets, regardless of the balance on the loan.

These features make the reverse mortgage the right choice for many seniors.  Contact Armando Barbosa at 348-0077.

Texas Dept of Savings & Mortgage Lending Recovery Fund Notice

These materials are not from HUD or FHA and this document was not approved by the Department or Government Agency.
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Vision Mortgage Company, Ltd.
In the Lincoln Center Building at Callaghan and I.H. 10 West
7800 I.H. 10 West, Suite 112 ~ San Antonio, Texas 78230-4768 ~ U.S.A.
Office: 210.348.0077 ~ Fax: 210.348.0542 ~ Cellular: 210.823.LOAN (5626)
Residential Mortgage Loan Originator NMLS ID# 340140
Company NMLS ID# 338634


Vision Mortgage Company is in the Lincoln Center, I-10 at Callaghan in San Antonio, Texas.

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