As parents enter retirement, adult children often fret about financial uncertainties. Will there be ample cash for their regular expenses? How will unexpected costs, like medical bills or travel, be managed? Addressing these concerns is simplified with the powerful tool of a reverse mortgage. Seniors with home equity can access a steady and stress-free source of liquidity. If you’re anxious about your parents’ retirement finances, explore the benefits of reverse mortgages.
What Families Should Know About Reverse Mortgages
Empower yourself by gaining a clear understanding of reverse mortgages. Acquire the crucial education about these loans to equip you for more meaningful discussions and better decision-making.
Some points to consider:
- What is a reverse mortgage? Unlike traditional mortgages, with reverse mortgages, parents typically receive payments from the lender, rather than making monthly mortgage payments. The flexibility extends to receiving funds as a lump sum, regular payments, a line of credit, or a hybrid option. They get to choose the method that best suits their needs.
- What are reverse mortgage qualifications? A homeowner must be at least 55 years old (though a non-borrowing spouse can be younger). Additionally, they must actively own and reside in the home designated for the mortgage. They do not need to own the home outright to qualify as long as they have significant equity.
- How can a reverse mortgage improve your parents’ financial situation? A reverse mortgage can mitigate issues with cash flow and budget constraints. Many savvy homeowners use the reverse mortgage as a financial tool to create a more secure retirement.
- What are the financial benefits of reverse mortgages? Funds from their home are converted to cash—tax-free (consult your tax advisor). Your parents receive the entire proceeds, and if the property value appreciates, they can capitalize on this additional advantage.
Key Reverse Mortgage Questions to Ask Your Loan Officer:
- How much will my parents have to pay? When the loan becomes due, the amount owed includes the balance of the loan, as well as other accumulated charges (insurance, interest, other fees), as itemized in the agreement. The amount to be paid will not exceed the value of the principal residence. This is what is meant when reverse mortgages are said to be ‘non-recourse’ loans.
- How is the loan repaid? This can happen in various ways. For example, the residence can be sold and the funds raised from the sale can pay for the mortgage. Any funds left over can then go to your parents or become part of the inheritance. Additionally, other funds could be used to pay off the mortgage if you prefer not to sell the home. Finally, refinancing the mortgage is another option to consider, for instance.
Learn More About Reverse Mortgages: Reach Out Today!
We know how important it is to provide tailored reverse mortgage loan information to our clients. Please call us at 800-791-5626, or fill out our online contact form.