As parents grow older and transition to retirement, adult children may find themselves worrying about how this will all work out. Will there be enough cash available to take care of their parents’ regular expenses? What happens if there is a large cost, like an illness or a desire to travel? One very useful tool in addressing these questions is the reverse mortgage. For seniors who have equity in their own home, this type of loan offers a regular and less stressful source of liquidity. So, if you are concerned about your parents’ financial situation during retirement, consider looking into reverse mortgage information.
Below we have provided some basic reverse mortgage information to answer common questions that adult children and loved ones have when it comes to reverse mortgages. To learn more reverse mortgage information, give us a call at 800-791-5626. You can also contact us through our online form. Our staff will be happy to offer information and help you determine whether reverse mortgage loans are the best choice given your parents’ particular situation and needs.
Reverse Mortgage Information: What Children Should Know
It is helpful for children, family members, and other financial advisors of seniors to understand what reverse mortgages are and what they bring to the table. Learning this important reverse mortgage information will allow you to have more useful discussions with family members and make better decisions.
For starters, here are some of the points you need to consider:
- What is a reverse mortgage? This is a type of loan where the equity that your parents have built up in their home is converted to cash. Unlike a traditional mortgage, it is the lender who generally makes payments to your parents, instead of vice-versa. These payments can come in the form of a lump sum, monthly or regular payments, a line of credit, or some hybrid of these. The particular reverse mortgage information regarding the payment method for your parent’s loan will be found in the details of the agreement.
- What are reverse mortgage qualifications? To take advantage of a reverse mortgage, a senior must be at least 62 years old (though a non-borrowing husband or wife can be younger). Your parent must also own and live in the home that will be used for the mortgage. Once the last borrower (or borrowers, if more than one) has left this principal residence, the mortgage must be paid. Also note, there are other qualifications such as your parents are responsible to pay all taxes, maintenance costs, and insurance for the home throughout the life of the loan.
- How can a reverse mortgage improve your parents’ financial situation? A reverse mortgage can be an important financial tool for many seniors in retirement. It can provide your folks with monthly payments, which they can use to take care of household and other expenses. If a larger amount is needed, a lump sum payment is also an option. This will help family members and children because your parents may not need outside help in order to fund their financial needs.
- What are additional financial benefits of reverse mortgages? Your parents may choose to rely on a reverse mortgage for their regular expenses, so that they can delay taking out Social Security. This delay can allow them to increase the Social Security benefits that they will eventually receive. In addition, the proceeds from a reverse mortgage are tax-free (consult your tax advisor), which means your parents will receive the full benefit of these funds. Furthermore, if the value of the property appreciates, your parents will be able to benefit from this as well. You can get more detailed reverse mortgage information regarding these benefits from your financial advisor or by getting in touch with us.
Other Reverse Mortgage Information
- How much will your parents have to pay? When the reverse mortgage loan becomes due, the amount owed will include the balance of the loan, as well as other accumulated charges (insurance, interest, other fees), as itemized in the agreement. Important reverse mortgage information to consider is that 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, your parents can sell the residence and use the funds raised from the sale to pay for the mortgage. Any funds left over can then go to your parents or become part of the inheritance. Additionally, your parents can use other funds to pay off the mortgage if they prefer not to sell the home. Finally, refinancing the mortgage is another option.
Learn More Reverse Mortgage Information for Seniors
We know how important it is to provide tailored reverse mortgage loan information to each and every one of our clients, and we would be happy to do the same for you. You can call us at 800-791-5626, or send us an email via our online contact form.