Texas is often associated with football and barbeque, but the Lone Star State is also known for having no income tax and a low cost of living.1 As of December 2018, Texas still ranked among the top 10 states with the lowest cost of living in the U.S. Combining these benefits, along with a wide range of cities and climates to choose from, makes Texas an ideal place to retire. In fact, an estimated 3.5 million over the age of 65 reside in Texas.2 While the cost of living is low, seniors in Texas should still have a financial plan in place to prepare for their retirement.
One financial tool that Texans can consider is a reverse mortgage. As the second most populous state, Texas is one of the largest reverse mortgage markets in the United States. More than 3,000 homeowners tapped into their home equity using a reverse mortgage in 2018.3
Unlike a traditional mortgage, a reverse mortgage is a loan for senior homeowners 62 years of age and older which takes part of the equity in the home and converts it to cash. The borrower has no monthly mortgage payments as long as the borrower lives in the home as the primary residence, maintains the home according to Federal Housing Administration (FHA) requirements, and continues to pay required property taxes and homeowner’s insurance.4
Borrowers can choose between various options on how to receive the funds from a reverse mortgage – a line of credit5, a lump sum payment (only available for fixed-rate loans), or monthly payments. The amount of equity a borrower may be able to access from the reverse mortgage is determined by current interest rates, the age of the youngest borrower, and the estimated value of the home.6
With a reverse mortgage, borrowers can decide how to use the proceeds from the loan, such as pay off credit cards or other debt7, cover monthly expenses, save for the unexpected, and remodel or repair their home.
Homeowners thinking of relocating to Texas can also use a reverse mortgage to purchase their new home. In this situation, the borrower can meet the down payment requirement through the sale of a previous home or personal funds, and the rest of the home price can be financed through the reverse mortgage.
If you are a homeowner 62 or older living in Texas, a reverse mortgage may help you live a more comfortable retirement. Try our reverse mortgage calculator above to receive a quick estimate of how much you may be eligible to receive, or call 1 (800) 976-6211 to talk to a licensed loan advisor.
1The Balance Small Business. The 10 States With the Lowest Cost of Living. https://www.thebalancesmb.com/states-with-lowest-cost-of-living-4137935
2United States Census Bureau Quick Facts Texas.https://www.census.gov/quickfacts/tx
3 U.S. Department of Housing and Urban Development. HUD FHA HECM Single Family Portfolio Snap Shot. https://www.hud.gov/program_offices/housing/rmra/oe/rpts/hecmsfsnap/hecmsfsnap The total 3000 was obtained by adding the total number of loans funded each month in the state of Texas in 2018.
4Your current mortgage(s) and any other existing liens against the property must be paid off at or before closing. You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
5The reverse mortgage loan balance grows at the same rate as the available line of credit. Line of credit growth occurs and is only a benefit when a portion of the line of credit is not used. The unused line of credit grows over time and more funds become available during the life of the loan.
6The funds available to you may be restricted for the first 12 months after loan closing. In addition, you may be required to set aside additional funds from the loan proceeds to pay for taxes and insurance.
7Your HECM loan will accrue interest that together with principal will have to be repaid when the loan becomes due.