Talking to Mom and Dad about how a Reverse Mortgage can Potentially Help Them in Retirement

If your parents don’t feel totally prepared for retirement, they are not alone. Given the financial challenges that older homeowners oftentimes face today, the option to tap into home equity can alleviate stress for them as well as their family members.

When talking about tapping into home equity with a reverse mortgage, there can be a lot of potential benefits, along with a lot of information to digest. Even the most financially savvy homeowners should take their time to learn about this type of loan and its benefits, and it is very prudent to have questions.

Here are 5 talking points to help guide the conversation with your parents about how a HECM (Home Equity Conversion Mortgage) reverse mortgage can potentially help. 

1. 1. You’ve worked hard to build your home equity. This may sound basic, but homeownership is a major accomplishment! If your parents are hesitant about the idea of tapping their home equity, discuss with them that this can be a viable possibility to consider:  Eligible homeowners may have an option to be able to tap into and enjoy their home equity after many years of paying down a mortgage.
   2. You 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 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.
   3. A reverse mortgage provides options. Reverse mortgage loan proceeds can be taken as a HECM line of credit, monthly or term payments, or as an initial lump-sum draw. Because every situation is different, it’s reassuring to understand that this loan provides options. Your parents can even make payments toward the loan balance, if they so choose.
   4. View a reverse mortgage as a safety net. Even if your parents don’t need their equity now, taking the loan as a HECM line of credit might provide peace of mind for the future. Should there be a health care expense or other unforeseen event, the line of credit is there when you need it. (FHA may limit draw amounts available early in the loan.)
   5. Tapping home equity can lessen the burden. Many aging Americans worry about being a burden to their family members. Tapping into home equity can potentially help ensure that your parents aren’t a financial burden to their loved ones. A reverse mortgage can possibly free up time and financial resources for adult children and other family members.

   A reverse mortgage can provide relief to qualifying homeowners, 62 and older. Talking about the benefits can help show the ways in which a reverse mortgage could help your parents or other loved ones.

   Contact a Finance of America Reverse Mortgage Specialist today to discuss further options and details.

   *If the borrower does not meet loan obligations such as payment of property taxes, fees, hazard insurance and maintaining the home, then the loan will need to be repaid. The home must be the primary residence.

This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.