What a reverse mortgage in Houston actually is
A reverse mortgage lets a Houston homeowner who is 62 or older borrow against the home with no monthly principal and interest payment. Instead of you paying the balance down every month, interest gets added to the balance, and the loan is repaid when you sell the home, stop living in it, or pass away. The version nearly everyone gets is the HECM, short for Home Equity Conversion Mortgage, which is insured by the FHA.
Two things people consistently get wrong. First, the bank does not take your house. You stay on the title, you own the home, and you can sell it whenever you want. Second, this is not a government benefit or free money. It is a loan, with interest and real closing costs, that happens to be structured so the repayment comes out of the home later instead of out of your checking account now.
The honest one-sentence version: a reverse mortgage trades some of your kids' future inheritance in the house for cash flow you can use while you are alive. For some Houston homeowners that is exactly the right trade. For others it is not, and I will get to who should walk away.
Who qualifies, and the counseling session you cannot skip
The requirements are shorter than a regular mortgage. The youngest borrower must be at least 62. The home has to be your primary residence, and you generally need to own it outright or have a low enough balance that the reverse mortgage can pay it off, which in practice means somewhere around half the home's value or more in equity.
There is no income requirement in the way a regular loan has one, but there is a financial assessment. The lender has to confirm you can keep paying property taxes and homeowners insurance. If the numbers are tight, the loan can still work, but part of your proceeds gets set aside in an account that pays those bills for you. That set-aside sounds restrictive and is actually one of the better consumer protections in the program.
Before you can even apply, HUD requires a counseling session with an independent counselor who does not work for any lender. It usually costs somewhere between $125 and $200 and can be done by phone. Do not treat this as a hoop. The counselors are good at surfacing the question that matters, which is whether this loan fits your actual plan for the next ten years.
What it costs, honestly
A HECM is expensive money, and anyone who tells you otherwise is selling too hard. At closing you pay an upfront FHA mortgage insurance premium of 2% of the home's appraised value, an origination fee that federal rules cap at $6,000, and normal third-party costs like the appraisal and title work. Every year after that, FHA mortgage insurance accrues at 0.5% of the loan balance, and interest accrues on top.
Compare that to a regular cash-out refinance, where there is no 2% FHA premium and closing costs are meaningfully lower. If you have the income to qualify for a cash-out refi and the monthly payment fits your budget, the refi is usually the cheaper way to get at your equity. That is the first thing I check when a homeowner calls about pulling money out.
What you are buying with those higher costs is the removal of the monthly payment for as long as you live in the home. For a homeowner on a fixed income, that is not a small thing. It just needs to be priced with open eyes.
The three ways you can still lose the home
Some reverse mortgage ads imply you can never lose your home. That is false, and the failure cases are specific. You must keep paying property taxes. You must keep the home insured. And you must keep living in it as your primary residence and keep it in reasonable repair. Fall behind on any of those and the loan can be called due, and foreclosure is possible.
In Texas the one that bites is property taxes. A reverse mortgage does not make your tax bill go away, and around Houston that bill is often the single largest housing cost a retiree with a paid-off home still carries. If taxes are already a struggle, a reverse mortgage may only buy time unless the loan is structured with the tax set-aside I mentioned above. This is exactly the kind of thing the counseling session is designed to catch, and it is worth catching before closing rather than after.
How much money you can get
The amount depends on three inputs: the age of the youngest borrower, the home's value up to the FHA lending limit of just over $1.2 million, and current interest rates. Older borrowers qualify for more. As a rough shape, borrowers in their early 60s can typically reach something in the neighborhood of a third of the home's value, and borrowers in their 80s can reach half or more. Your actual number comes from a calculation on your specific age, home value, and the rates in effect that week.
You also choose how to take it: a line of credit you draw on when needed, fixed monthly payments for a set period or for as long as you live in the home, a lump sum, or a mix. The line of credit has a feature most people have never heard of: the unused portion grows over time, so the amount available to you gets larger the longer you leave it alone. For homeowners who want a safety net rather than cash today, that credit line is usually the smartest structure.
HECM for Purchase: the downsizing move almost nobody in Houston uses
Here is the version of this product that genuinely surprises people. You can use a reverse mortgage to buy a home. It is called HECM for Purchase, and it is built for exactly the situation I see all over southwest Houston: a homeowner in their 70s in a paid-off two-story who wants a one-story, but does not want a new mortgage payment and does not want to sink every dollar from the sale into the next house.
The structure looks like this, with rounded numbers for illustration. Sell the longtime home for $500,000 and clear roughly $470,000 after selling costs. Buy a $350,000 one-story. Instead of paying $350,000 cash, you bring roughly half, with the exact share set by your age, and the HECM funds the rest. You move into the new home with no monthly principal and interest payment and keep well over $200,000 in the bank. Compare that to paying all cash, where the payment is also zero but the cash is gone.
Because I hold both a real estate broker license and a mortgage license, I can run both sides of that move: the sale of the old home and the reverse financing on the new one, as one conversation instead of three vendors pointing at each other.
Texas rules worth knowing
Reverse mortgages in Texas are authorized directly by the state constitution, which layers some extra borrower protections on top of the federal ones. HECM for Purchase became legal here after Texas voters approved it in 2013, which is part of why so few local agents have ever seen one in the wild.
The loan is non-recourse. Neither you nor your heirs can ever owe more than the home is worth when the loan is repaid, even if the balance has grown past the home's value. If your heirs want to keep the house, they can settle the loan for the balance or 95% of the appraised value, whichever is less. And because the money you receive is a loan advance rather than income, it is generally not taxed as income, though you should confirm your specific situation with your CPA.
Who should not do this
Skip a reverse mortgage if you are likely to move within a few years. The upfront costs only make sense spread over a long stay, and a short stay turns them into very expensive rent. Skip it if you have the income to qualify for a cheaper cash-out refinance and the payment fits comfortably. And think hard if leaving the house free and clear to your children is the thing you care about most, because this loan spends that equity on purpose.
A reverse mortgage is a specialized tool, not a default answer. When it fits, nothing else does the same job. When it does not fit, there is usually a cheaper path to the same goal, and finding that path is the actual work.
How to run your own numbers
If you want to know what a HECM would look like on your home, the useful inputs are your age, your best guess at the home's value, and what you want the money to do: monthly cash flow, a standby credit line, or a downsized house with no payment. From there the math is quick, and the required counseling session gives you an independent second opinion before you commit to anything.
I am happy to run the numbers both ways, reverse mortgage against a regular cash-out refinance, so you can see the real cost of each side by side. If the cheaper tool wins, that is the one I will tell you to use.