Reverse Mortgage for Purchase
By Jerry Rutledge, CREI, DREI, CMC
Have you not heard of a reverse mortgage “for purchase”? Maybe it’s because Texas is the only state in our grand union which hasn’t approved reverse mortgages “for purchase”.
A reverse mortgage for purchase is possible for those folks over 62 yrs who want to sell their home and buy another home with the proceeds coupled with a reverse mortgage.
Well it can’t be done in Texas even though it is in the best interests of many older folks.
Let’s say a couple can net $200.000 cash after paying off their mortgage from the sale of their $300.000 home.Perhaps this is all the cash they will have.Now they want to buy a smaller $200,000 home.
What are their options?They could put in $100,000 cash from the sale of their home and apply for a regular $100,000 mortgage but they don’t have the income they once had and can’t make those mortgage payments.Or they could pay all cash for the smaller $200,000 home which leaves them no cash for any purpose.With a reverse mortgage, there are no monthly payments to principal and interest but they must be current on their property taxes and insurance.Someone needs to explain that to the Senator and the Fonz when they say on TV there are “nomortgage payments” with a reverse mortgage.
One of the requirements to get a reverse mortgage in Texas is that the couple must own their own home.That rules out a reverse mortgage for purchase.
To comply with the “must own your home” rule, a couple could buy the $200,000 home using up all their cash, wait a cash lean year, then get a reverse mortgage for $100,000 and finally have the cash they need to survive.Of course, there will be a duplication of costs because I just described two closings when it could have been just one closing.
Reverse mortgages are part of our home equity laws contained in our Texas Constitution which means once approved by 2/3 of our legislators, it then must go to our vote in the November 5th general election
SJR 18, Reverse Mortgage for Purchase is supported by Texas Association of Realtors, AARP, TBA, Texas Association of Homebuilders and the Texas Mortgage Bankers Association.
It should be evident that reverse mortgages for purchase are a win-win-win.For real estate agents, there are two sales.For mortgage lenders, there is a reverse mortgage and for our seniors it is the critical solution to a needless problem.
By Jerry Rutledge, CREI, DREI, CMC