In Texas and many other parts of the country, senior citizens are being squeezed. They receive, on average, $965 per month in social security. And, while property taxes vary, a senior in many Texas cities with a home valued at $100,000 will pay more than $200 per month in property taxes alone. Add to that the high cost of necessities like health care, prescription medicine, utilities, and mortgage payments, and the financial picture can be very bleak. It's no wonder that many seniors face foreclosure or tax liens on their homes.
"Reverse mortgages are important to Texas seniors because they allow them to obtain a loan against the equity in their home--often their single largest asset--without making monthly payments to repay that loan. That means that with a government-insured reverse mortgage, a senior will never lose his or her home to a bank simply because he or she could not make a payment," said Craig Castle, a San Antonio reverse mortgage specialist for the past four years.
So why don't more Texas seniors take advantage of this financial product?
Castle says that in his experience, seniors shy away from reverse mortgages for three reasons:
- 1. Fear
- 2. Bad advice
- 3. The availability of other, more well-advertised, loan products
"I have had many clients elect not to complete the reverse mortgage process because of fear," Castle says. "Usually, the additional cash could have improved their lives significantly."
Seniors' fear is not unfounded. They are often the targets of scams and fraud. But, reverse mortgages have one important safe-guard built into them to protect even those who are uncomfortable making financial decisions. In order to obtain a government-insured reverse mortgage, a senior must have counseling by a HUD counselor with the local housing authority or the Consumer Credit Counseling Office. This unbiased person can help the senior determine whether a reverse mortgage makes sense for his or her individual situation.
And, sometimes well-meaning family and friends give bad advice.
"I have had ministers tell clients that they heard that you could lose your home with a reverse mortgage," Castle said. "It isn't true, but advice isn't always based on facts."
The availability of home equity loans also clouds the picture for many seniors. "Home equity loans can be appropriate for people who have an income, but they often spell disaster for seniors," Castle said. "I talk to potential clients every week who tell me that they are having problems keeping up with their payments."
"My experience has been that most home equity clients who are over 65 and have taken the maximum 80% of their home value will eventually lose their house--if they live at least 3-5 years beyond the date of loan origination," Castle added.
With a reverse mortgage, the homeowner can access from 40-60% of the appraised value of their home, but the loan is not repaid until they die or leave the home permanently. Then the home is sold and the proceeds are used to repay the loan, with any remainder going to the owner's estate.
To find out more about the benefits and requirements for a reverse mortgage, visit www.SouthTexasReverseMortgage.com and request the free Federal Trade Commission publication, Facts for Seniors about Reverse Mortgages. Or call Castle at 210-789-3685.
"Misinformation has prevented many seniors from getting a reverse mortgage when it would have provided them with greater financial stability--and peace of mind. That's why I like to have the family involved and why I often spend several hours at my clients' home explaining and re-explaining how a reverse mortgage works and how the various pay-out options can make their lives better," Castle said.
