Reverse Mortgages in Texas

If you are 62 or older and need a little extra money to pay for your life in Texas, you might consider a reverse mortgage. Texas has a few laws to protect consumers regarding reverse mortgages, and it’s helpful to know what they are so you know what to expect. 

This article will explain how to get a reverse mortgage in Texas, what protections you have, the requirements you’ll need to meet, and how reverse mortgages work differently from other states.

Can you get a reverse mortgage in Texas? 

Reverse mortgages are common in Texas. You should be able to easily find many reverse mortgage lenders that offer home equity conversion mortgages (HECMs), which are federally insured by the Federal Housing Administration (FHA). FHA standardizes qualifications for many borrowers. 

What’s different about a reverse mortgage in Texas surrounds a few unique consumer protections. Generally, they’re a good thing. Here’s what you’re looking at: 

• Fees are capped: In Texas, you can’t be charged more than 3% in fees for the reverse mortgage. 
• Loan-to-value ratio: Texas law prevents a lender from loaning more than 80% of the home’s value for a reverse mortgage. 
• Time restriction for mandatory counseling: Texas law requires lenders to wait at least five days after borrowers have completed the mandatory reverse mortgage counseling before closing the loan. 
• Age requirement: In Texas, both borrowing partners must be over 62. This is different from other states. One partner can be a non-borrowing partner if they’re younger than 62.
• Non-recourse protection: Texas supports federal law disallowing the reverse mortgage balance to be more than the home is worth at the end of the loan. 
• 12-day cooling off period: Lenders can’t close on the reverse mortgage for at least 12 days from receiving the loan application and mandatory disclosures. This cooling off period is meant to allow the borrower time to change their mind before proceeding with the loan.

Ask the expert

Erin Kinkade

CFP®

Borrowers may enter into a reverse mortgage agreement too quickly and, even with counseling services, you may not fully understand what binding agreement you are entering into. During the 12-day period, the borrower may have decided this is not the best route and other more economically beneficial options could arise. 

Reverse mortgage rates in Texas

As you explore your reverse mortgage options, you’ll find several reputable companies offering competitive products within Texas. We’ve reviewed the top providers to assist your search and highlighted their unique strengths.

Lender	Best for
Longbridge Financial	Low interest rates
Finance of America Reverse	Product variety
Fairway Independent Mortgage Corp.	Personalized guidance and education
Open Mortgage	Tech-savvy borrowers
American Advisors Group (AAG)	Customer service

Longbridge Financial: Best for low interest rates

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• Low interest rates
• Online rate calculator available
• Customizable payout options

Longbridge Financial stands out for its comparatively low interest rates. The company also offers an easy-to-use online rate calculator, which can help potential borrowers estimate their loan amount and potential costs. The variety of payout options allows customization based on your financial needs.

Finance of America Reverse: Best for product variety

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• Wide variety of reverse mortgage products
• Helpful online educational resources
• Experienced staff to guide borrowers

Finance of America Reverse excels at providing diverse reverse mortgage options, matching various borrower needs. Along with its range of products, it offers educational resources to help you understand the nuances. Its experienced staff is known for helping borrowers navigate the reverse mortgage process smoothly.

Fairway Independent Mortgage Corp.: Best for personalized guidance and education

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• Provides consumers with tailored guidance on reverse mortgages
• Offers educational resources for those new to this financial tool
• Popular for its commitment to best-practice standards

Fairway Independent Mortgage Corp. is highly regarded when it comes to personalized service. You’ll likely appreciate the individualized guidance it provides if you’re new to reverse mortgages. 

It’s also known for its commitment to regulatory compliance and industry best practices, which offers added assurance to borrowers.

Open Mortgage: Best for tech-savvy borrowers

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• Streamlined online application
• User-friendly platform 
• Quick and painless digital processing 

Open Mortgage caters to the tech-savvy borrower with its streamlined online application. The company’s platform is designed to make obtaining a reverse mortgage as quick and straightforward as possible. It is an excellent choice for those who are comfortable navigating digital platforms. 

Its commitment to providing a seamless online experience sets it apart. With Open Mortgage, the path to securing a reverse mortgage has never been easier—or faster.

AAG: Best for customer service

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• Outstanding customer service 
• Personalized and direct communication
• Responsive and efficient processing  

AAG stands out for its exceptional customer service. The company ensures every client receives personalized and direct communication throughout the reverse mortgage process. This level of attentive service is invaluable when navigating the intricacies of a reverse mortgage. 

AAG’s response and efficiency are noteworthy. Indeed, a customer-first approach is at the core of AAG’s operations, cementing its role as a leading provider of reverse mortgages.

What you need to know about Texas reverse mortgages 

Texas reverse mortgages work as they do elsewhere in the country. With a reverse mortgage, you receive money instead of paying it. 

You can receive the money in a lump sum, in monthly installments, or as needed. Any funds you receive are added to the growing loan balance, as is the interest charge that comes with it. The reverse mortgage must be repaid once you pass away, sell the home, or permanently leave the home. 

Eligibility requirements for a reverse mortgage

There are federal requirements that lenders and borrowers must meet to be able to make a reverse mortgage happen. For borrowers, these include:

• Be over age 62
• Live in the home as your primary residence
• Home in good condition
• Have over 50% equity (preferably more)
• Have paid your taxes and insurance
• Prove you can pay taxes, insurance, and fees in retirement
• Maintain the property

If you’re qualified, you can then look at how much you’ll be able to get from a reverse mortgage. This is the principal limit and differs greatly from a traditional mortgage. 

How much will I get from a reverse mortgage in Texas?

The principal limit is the maximum amount you can borrow with a reverse mortgage, including interest charges. Factors that determine what this number will be include your age, interest rate, home value, and equity. 

Generally speaking, the lower your interest rate and the older you are, the more you can qualify for. 

What are the current interest rates for reverse mortgages in Texas?

As of March 2024, interest rates for a reverse mortgage in Texas start at 8.996% APR for a fixed interest rate and 6.750% APR for a variable interest rate. These vary daily by lender and your unique situation.

Consumer protections and legal considerations for Texas reverse mortgages

Reverse mortgages represent a complex, long-term financing tool that should be entered into with much caution. Even though they don’t need to be repaid until loan maturity, they can be a costly lending tool. 

In Texas, if you have problems with a licensed mortgage broker, you may be entitled to compensation of up to $25,000. 

There’s a recovery fund for Texas borrowers harmed by the fraudulent actions of mortgage originators, including those who issue reverse mortgages. Consumers can file a complaint form with the Texas Department of Savings and Mortgage Lending. 

There are also scams you’ll want to watch out for. Fraudsters may try to convince you to take out a lump sum reverse mortgage for several legitimate-sounding purposes, but once they have your money, they’re gone. 

How to get a reverse mortgage in Texas

When you’re ready to take the next step for a reverse mortgage in Texas, you’ll go through a process that looks like this. 

Shop around for lenders

Shop for a loan that meets your needs and helps you get the best terms. Look for:

• Interest rates, fees, and terms: Compare the reverse mortgage costs among multiple lenders. The interest rate, especially, impacts how much equity you can access.
• Fine print: Make sure you understand the disclosures and fine print. Take time to consult with a financial advisor or other professional to go over the loan terms.
• Upfront costs: Even though upfront costs can be rolled into the loan, shopping around can help you reduce these.   
• Variable or fixed interest rate: Most reverse mortgages have a variable interest rate. Fixed-rate reverse mortgages typically require taking the loan as a lump sum. 

Start the application process

After you’ve looked at several lenders and their terms for a reverse mortgage, you’ll start the application process which can take up to 45 days.

1. Complete federally required reverse mortgage counseling. A third party conducts mortgage counseling and includes educational information about reverse mortgages.
2. Apply with the lender of your choice. Most reverse mortgage lenders don’t have prequalification, so you may only want to submit a full application with the lenders you’re serious about.
3. Go through loan processing. As part of the loan process, the lender will go through your credit report, collect required documents, order an appraisal, order a title search, send your documentation to underwriting for approval, and anything else they deem necessary. 
4. Sign and close on your loan. Once the underwriter has reviewed and verified all documentation, you may get the all clear to close on your loan. 
5. Receive your funds. You’ll receive your funds approximately three business days after closing the loan. 

Texas reverse mortgage FAQ

What are the age and property requirements for a reverse mortgage in Texas?

To qualify for a reverse mortgage in Texas, you or your spouse must be at least 62. The home to be mortgaged should be your primary residence. It could be a single-family home, a two-to-four-unit property with one unit occupied by the borrower, or a HUD-approved condominium.

How does Texas’s legislation affect my reverse mortgage options?

Texas was the last state to allow reverse mortgages and passed specific laws to protect homeowners. For example, it requires a “cooling off” period of 12 days before closing, to allow you time to understand all terms and conditions. Texas law also caps the total amount of equity you can borrow.

What happens if I outlive the loan term of my reverse mortgage in Texas?

Reverse mortgages in Texas are called home equity conversion mortgages (HECM) and are insured by the federal government. You can still live in your house if you outlive your loan term. Repayment is only due when you move out, sell the home, or pass away.

Can I leave my home to my heirs if I take out a reverse mortgage in Texas?

Yes, after your death, your heirs can repay the reverse mortgage loan and keep the home or sell the home and use the proceeds to pay off the loan. Any remaining equity after paying the loan belongs to your heirs.

How are reverse mortgage interest rates determined in Texas? Are they different from regular mortgage rates?

Reverse mortgage interest rates in Texas are determined by several factors, including the current market rates, the borrower’s age, and the home’s value. They could be slightly higher than regular mortgage rates due to the additional insurance cost included in reverse mortgages.

What are my obligations as a reverse mortgage borrower in Texas?

As a reverse mortgage borrower in Texas, your obligations include maintaining your home well, paying property taxes and homeowners insurance on time, and living in the home as your primary residence.