Reverse Mortgage in Texas: What Dallas Homeowners Need to Know in 2026

What Is a Reverse Mortgage in Texas, and How Does It Work?

A HECM (Home Equity Conversion Mortgage) is a federally insured reverse mortgage that lets homeowners 62 and older convert a portion of their home equity into tax-free cash without making monthly mortgage payments. The loan balance grows over time and becomes due when you sell the home, move out permanently, or pass away. Texas governs reverse mortgages through its constitution under Article XVI, Section 50(k), which includes a mandatory 12-day waiting period before signing any loan documents that cannot be waived under any circumstances.

By Paul Blair | October 3, 2026

Your home may be worth more than it's ever been. If you're a homeowner in Park Cities, Preston Hollow, or Lake Highlands sitting on significant equity while drawing down retirement accounts to cover monthly expenses, there's a federally insured option worth understanding before you make any other financial moves.

A reverse mortgage isn't a last resort. For the right homeowner in the right situation, it's a deliberate financial tool. But Texas has rules that differ from every other state, and the details matter before you sign anything.

What a HECM Actually Does

The only reverse mortgage insured by the federal government is the HECM, backed by HUD and FHA. Every other "reverse mortgage" product is proprietary.

With a HECM, you borrow against the equity in your home. The loan doesn't come due while you're living in the house, paying property taxes and insurance, and maintaining the property. You can take the proceeds as a lump sum, a monthly payment, a line of credit that grows over time, or any combination of those options.

The line of credit feature deserves specific attention. The unused portion of a HECM line of credit grows at the same rate as the loan's interest rate. If you open a $300,000 line and don't touch it for five years, you'll have access to more than $300,000 when you draw from it. That's not guaranteed to outpace inflation, but it's a feature no standard home equity line of credit offers.

How much you can borrow depends on your age, current interest rates, and your home's value. In 2026, the HECM lending limit is $1,249,125. If your home is worth more than that, the calculation stops at that number. In practice, most borrowers access between 40% and 60% of their home's appraised value. A 75-year-old with a $900,000 Park Cities property at today's rates might access $450,000 to $500,000.

What Makes Texas Different

Texas is the only state that governs reverse mortgages through its constitution rather than statutes. Article XVI, Section 50(k) applies here, and it imposes protections that borrowers in other states don't have.

The most significant: after you receive the required loan disclosures, you cannot sign any loan documents for 12 calendar days. This waiting period isn't negotiable. It exists so you have time to review everything without pressure.

You're also required to complete HUD-approved independent counseling before the lender can proceed. An independent HUD-approved counselor will walk through your financial situation, the loan terms, alternatives, and what happens to the home when the loan comes due. The HUD counseling hotline is 800-569-4287. Sessions typically cost $125 to $150.

One protection that applies nationally but matters especially in high-value markets like Dallas: non-recourse protection. You can never owe more than the home sells for, even if the loan balance exceeds the appraised value at repayment. FHA mortgage insurance covers the difference. Your heirs will never be personally liable for a shortfall.

If you've been thinking through your financial options as a senior homeowner in Texas, it's worth reading how the over-65 property tax freeze works in Dallas. That benefit can stack with a reverse mortgage in some situations.

The Four Things That Can Trigger Default

A reverse mortgage can go into default if you don't meet the ongoing obligations. Four things can trigger it:

• Failing to pay property taxes
• Failing to maintain homeowner's insurance
• No longer occupying the home as your primary residence for more than 12 consecutive months
• Allowing the property to deteriorate to the point of failing an FHA inspection

These aren't surprising, but they catch homeowners who assume a reverse mortgage means no further obligations. The loan stays active as long as you stay in the home and meet these requirements.

What Happens When the Loan Comes Due

When the borrower passes away or permanently moves out, the estate has 30 days to decide what to do with the property. After that, up to 12 additional months are typically available to sell the home or arrange other financing, with extensions possible in some situations.

If the home sells for more than the loan balance, the remaining equity goes to the estate. If it sells for less, FHA mortgage insurance covers the difference. Your heirs are not personally responsible for any gap.

One rule change from 2015 that's directly relevant to Dallas homeowners: if you have a spouse who wasn't yet 62 when you took out the loan, they can still remain in the home as a qualifying Non-Borrowing Spouse after you pass away, as long as they meet HUD's requirements. Your HUD counselor will walk you through the specific conditions.

What It Costs to Set One Up

The costs of a HECM are higher than a conventional mortgage, and that's worth knowing upfront.

FHA mortgage insurance: 2% of the home's appraised value or the HECM limit at closing, whichever is lower, plus 0.5% annually on the outstanding loan balance. On a $700,000 home in Lake Highlands, that's $14,000 upfront.

Origination fee: lenders can charge up to $6,000.

Closing costs: title, appraisal, counseling, and other standard fees typically run another $3,000 to $5,000.

Total costs at closing on a $700,000 home often land in the $20,000 to $25,000 range. Most borrowers roll these into the loan balance rather than paying out of pocket.

The costs are real and they reduce your available equity. That's why this decision is worth running through a HUD counselor before you commit.

HECM for Purchase

One option that isn't widely known: you can use a HECM to purchase a new home. If you're downsizing from a larger Park Cities home to a condo in Preston Hollow, or relocating to be near family in Frisco or McKinney, a HECM for Purchase lets you buy with roughly 40% to 60% down (depending on your age and current rates) and never make monthly mortgage payments on the financed portion.

This is worth knowing if you're planning to sell one home and buy another in the same move.

How to Think About Whether This Is Right for You

A HECM tends to make sense when you plan to stay in the home long-term, you want to supplement retirement income or eliminate an existing mortgage payment, and you've had a conversation with your family about what happens to the home.

It tends to make less sense if you're planning to sell within a few years (the upfront costs won't be worth it), if you have other untapped borrowing options, or if passing the home to heirs with minimal encumbrance is a primary goal.

Two alternatives worth comparing before deciding: a Texas home equity loan under Section 50(a)(6) and a cash-out refinance. Both require monthly payments but don't carry the same upfront insurance costs. Which one fits depends on your income, your goals, and your timeline.

Frequently Asked Questions

Can a reverse mortgage company take my home in Texas?

Not while you're living in it and meeting the loan obligations. As long as you pay property taxes and homeowner's insurance, maintain the home in reasonable condition, and continue using it as your primary residence, the lender cannot call the loan or force a sale. The Texas constitutional protections under Section 50(k) are specifically designed to prevent that.

Does a reverse mortgage affect my Social Security or Medicare benefits?

Generally no. HECM proceeds are loan advances, not income, so they don't count toward Social Security or Medicare eligibility or benefits. Medicaid is a different situation: if you receive HECM proceeds and let them sit in a bank account past the end of the calendar month, that balance could affect Medicaid eligibility. A financial advisor familiar with Medicaid asset rules can help you manage this if it's relevant to your situation.

What happens to my children's inheritance if I get a reverse mortgage?

It depends on how much the home appreciates relative to the loan balance over time. If the home appreciates significantly while the loan grows, your heirs may still receive meaningful equity when the home sells. If appreciation is modest, they'll receive whatever equity remains after the loan balance is paid, or nothing if the balance equals what the home sells for. What they won't face is personal liability for a shortfall. FHA mortgage insurance covers any gap between the loan balance and the sale price.

How is a Texas reverse mortgage different from a Texas home equity loan?

They're governed by different sections of the Texas constitution and work in completely opposite directions. A home equity loan under Section 50(a)(6) requires monthly payments and reduces your debt over time. A HECM under Section 50(k) has no monthly payments and increases the loan balance over time. They also have different eligibility requirements, different costs, and different intended uses. With a reverse mortgage, you're not paying down debt. The balance grows until the loan comes due.

How does knowing my Dallas home's current value affect the reverse mortgage calculation?

The HECM amount is tied directly to your home's current appraised value, up to the 2026 lending limit of $1,249,125. Knowing your current market value is the first step in understanding how much equity is actually accessible. For homeowners in Park Cities, Preston Hollow, or Lake Highlands where values have moved significantly in recent years, that number may be higher than you'd expect. If you want to start with an accurate picture of what your home is worth in today's Dallas market, reach out at greysq.com/contact.

If you're 62 or older, own a home in Dallas, and working through whether a reverse mortgage fits your situation, the first step is understanding your home's current market value and how that translates into available equity. For homeowners in Park Cities, Preston Hollow, or Lake Highlands, that's a conversation I can help you start. Reach out at greysq.com/contact.

About Paul Blair

Paul Blair is the founder and broker of Grey Square, a virtual real estate brokerage representing buyers and sellers across Dallas and Los Angeles. With 22 years in the business and more than $200 million in closed transactions, Paul works the full range of the market, from luxury homes in the Park Cities and Preston Hollow to estates in the Hollywood Hills and across the Westside. Connect with Paul and the Grey Square team at greysq.com. TX TREC #9011505 | CA DRE #01792671.