As a mother, you may be on the fence about getting a reverse mortgage because you are uncertain about how it could affect your children.
Two reasons that some mothers are hesitant to get a reverse mortgage is that they are concerned about leaving some type of legacy for their heirs, and that their children will be responsible for paying off the loan.
Obtaining a reverse mortgage will not play out the same for each woman nor will each woman use a reverse mortgage in the same manner. But for many families, a reverse mortgage can actually give grown children peace of mind knowing that their mother is not a financial burden. And, it can give mothers financial peace of mind knowing this, too.
Informing Your Kids
Whether or not a reverse mortgage is the right financial option for you is a very personal decision and based on many factors. In most cases, it’s a good idea to discuss this option with your children and explain what this will mean for them before making your final decision.
Another suggestion is to invite your children to your required reverse mortgage counseling session before you complete your loan application. Questions may arise and the counselors are well equipped to provide factual reverse mortgage information.
The Role of Your Children
Heirs won’t need to repay more than the home is worth at the time of sale. If the borrower has passed away when the loan balance comes due, the heirs or estate may repay the debt by selling the home. It is important to note that when the property is sold, the borrower’s heirs will not have to repay more than the home is worth at the time of sale.
Federally-insured HECMs (Home Equity Conversion Mortgage) come with this very important feature. However, if the borrower’s heirs would like to keep the home once the borrower passes away, they can choose to pay off the full loan balance using other funds and keep the home. It is a good idea for your heirs to move as quickly as possible at this time to potentially preserve any equity that remains in the home. Any additional proceeds that are left over after the loan is repaid will go to the heirs.
Of course, if your children live in your home with you, it’s important for them to understand that the loan will become due if you pass away or move, and they will be impacted by the loan balance coming due.
If you’re a homeowner, age 62 or older, looking for more information on how to talk with your family about your decision to get a reverse mortgage or how it could impact them, please contact a Finance of America Reverse mortgage specialist.