Children & Caregivers
Luckily, reverse mortgages are available to help older Americans access the wealth in their homes to alleviate much of the stress these challenges create. A reverse mortgage offers retirees the opportunity to live safely and comfortably in their own homes, on their own terms.
Aging-in-place may help enhance your loved ones quality of life by enabling them to:
Continue living in a familiar environment
Preserve their community connections
Remain close to family and friends
Reside in a home that may have emotional value for them or their family
Helping your loved ones remain in the comfort of their own home may be the greatest gift you could give them.
How Does It Work?
A reverse mortgage is a type of home loan that allows your parents or grandparents or loved ones to turn the equity in their home into cash to improve their retirement lifestyle and alleviate their financial burdens. Reverse mortgage borrowers continue to live in their homes, retain full ownership, and are not required to make any monthly mortgage payments. Instead of monthly payments, the loan is repaid in one lump sum when the last borrower leaves the home. As always, the borrower is responsible for their property taxes, homeowners insurance, and basic maintenance of the home.
Reverse Mortgage Options
The amount you receive is based on the borrower’s age, home value, and current rates.
Borrowers also have the flexibility to choose from one or more of these payment options:
A lump sum
A line of credit
Or a combination of all of the above
What happens to my inheritance?
Borrowers may will the home to loved ones as they wish, and heirs may still choose to sell or keep it after repaying the loan. There are also various methods that borrowers or heirs can use to repay the loan when it is due.
Does the bank own my parent’s home?
Reverse mortgage borrowers retain full ownership of their homes just like regular mortgages. They are not relinquishing title or ownership using a reverse mortgage, simply borrowing against the value of the home. A borrower may not lose their home as long as they continue to pay property taxes, homeowners insurance, and the standard terms of the loan.
How do we repay the loan, and how much will we owe?
The loan is repaid once the last borrower leaves the home. If the home is sold, the loan and interest is repaid, and any remaining equity goes to the heirs. Of course, heirs can also choose to keep the home and repay the loan with a traditional mortgage or refinancing.
How is a reverse mortgage different from other home loans?
Due to income and credit requirements, many seniors with fixed incomes can no longer qualify for most home loans, including home equity loans, but they can qualify for a reverse mortgage. Traditional home loans require regular monthly payments, which may create even further financial stress. Repayment of a reverse mortgage is deferred until the loan is due, which is typically when the borrower moves, sells the home, or passes away. Reverse mortgages are also non-recourse, FHA-insured loans, offering additional safeguards for senior borrowers and their families.
We encourage loved ones to get involved and go through the loan process alongside family members so that everyone understands how the reverse mortgage works and how the process flows. We also understand that a mortgage is a big financial decision. The following helpful tips may assist you with your family discussions about reverse mortgages.
TIP 1. Be honest about finances. Ask your parents to be truthful about their current situation and their projected future situation. Are they living a comfortable retirement? Can they afford to maintain their current lifestyle for 10 years or more? If not, can you afford to supplement their income? Will you be able to afford medical bills or in-home care now, or in the future?
TIP 2. Be honest about your family goals. Some seniors have enough income to get by, but want more for their retirement. Do they want to travel, modify their home to maintain their independence, or just have the security of extra money in the bank, or an extra line of credit for peace of mind? Your parents have worked hard and deserve a fulfilling retirement – how can that best be achieved?
TIP 3. Talk to a Licensed Professional about your family’s situation, including your questions and concerns. You may find that some sources of information available on the internet or through word of mouth may be biased, outdated, or inaccurate. An expert in reverse mortgages can help you assess your parents financial situation, provide the most up-to-date facts about today’s reverse mortgages, provide written proposals which show how much you are eligible for, and walk you through the process every step of the way.