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Change In Texas Law May Make Reverse Mortgages More Popular
By: Charles Essmeier
Texas was one of the last states to allow homeowners to take out home equity
loans. Laws going back to the nineteenth century strictly prohibited home equity
lending, as legislators feared that unscrupulous lenders would take advantage of
homeowners for the purpose of seizing their homes through foreclosure. This made
it impossible for citizens of the Lone Star State to use their equity for home
improvements, debt consolidation or paying medical bills, as homeowners in other
states may do.
In 1997, the Texas constitution was amended to allow homeowners to borrow
against their home equity. The amendment allowed for traditional term loans,
lines of credit, and reverse mortgages, but did not allow a line of credit on a
reverse mortgage.
In a reverse mortgage, owners of homes who are at least 62 years of age may
borrow against the equity in their home. They need not pay the money back until
they die, move or sell the home. Reverse mortgages have become quite popular in
the last few years, especially in areas like California, where homeowners may be
cash poor but may have a lot of equity in their homes. Nationally, nearly 90% of
homeowners who take out a reverse mortgage do so with a line of credit. In
Texas, however, the only options are a lump sum or monthly payments. There are
several advantages in taking a reverse mortgage in the form of a line of credit,
rather than a lump sum. The most significant is the fact that interest is only
due when money is actually drawn from the credit line. This saves the homeowner
substantial amounts of interest over the life of the loan when compared to a
lump-sum payout. Reverse mortgages have been quite popular in Texas since the
law was changed to allow them, but lenders say that the demand should increase
substantially if lines of credit are allowed.
The Texas Legislature has recently approved a constitutional amendment that will
allow lines of credit.for reverse mortgages, and this amendment is expected to
be on the ballot in Texas this fall. This bill is expected to pass easily, and
once it does, Texas may become the leading state in the country for issuing
reverse mortgages.
About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com,
a Website devoted to debt consolidation information and http://www.HomeEquityHelp.net,
a site devoted to information on home equity loans. |
