A Reverse Mortgage could well be the answer for the financial security of your parents. By using the equity in their home, they can meet the special and often unanticipated financial demands that face them, be it medical care, long term care insurance, home improvement costs, condominium assessments, etc. Or they can simply enjoy a better lifestyle in retirement.
If you are the son or daughter of a senior who is 62 years old or older, you owe it to them to be familiar with the facts regarding Reverse Mortgages. The number of Reverse Mortgages has been increasing, it is anticipated that the popularity of these mortgages will continue to increase as more and more baby boomers are retiring, and as the need for accessing their home equity is an option for their needs that is considered.
With a Reverse mortgage, your parents can receive money-
* Without moving from their home. They can receive tax free money without having to sell their home, and, in fact, they can choose to receive money monthly for as long as they live in their home (Tenure) or for a set number of years (Modified Tenure or Term). When considering a tenure plan or modified tenure plan, it should be noted that the monthly payments in a tenure plan will not change, and cannot be accessed for special expenses. Additionally, in a modified tenure plan, the borrower can out live their specified number of payments, and thus have their monthly income diminished accordingly.
*No monthly payments. Instead of paying a bank each month, they can receive money based on the equity in their home, without making any monthly payments. They are, however, required to pay their real estate taxes, homeowners insurance, and must maintain their home. It must also remain their primary residence. If they choose a modified Tenure reverse mortgage for a specific length of time, it is possible that they outlive the money stream.
*Financially Independent. A reverse mortgage allows seniors to utilize their own assets, the equity in their home, without being financially dependent on members of the family. The psychological benefit is immeasurable.
*Keep title to their home. With a Reverse mortgage, your parents retain the title to their home with no risk of losing it to the lender as long as they pay their taxes, insurance, HOA, and maintain the property. In fact, as a “non-recourse” loan, they can never owe more than their home is worth, even if the home’s value goes down. Importantly, unlike a traditional forward mortgage, no other assets can be affected at any time. While they cannot lose their home under normal circumstances, again, they can be foreclosed if they do not pay their real estate taxes, insurance and otherwise fulfill the other terms of the loan.
*No affect on Social Security or Medicare. Since they are borrowing the money, there is no affect or Social Security, Medicare, or pensions.
* Government protected. HECM (Home Equity Conversion Mortgages) are insured by the U.S. Government and there are many safeguards in place to protect the borrower from unethical lending practices. If your lender owes you money on a credit line or monthly payment plan, the FHA insures that your mortgage will be fulfilled. The Proprietary Reverse Mortgages are backed by some of the strongest and most formidable lending institutions in the country.
* Repayment of the Loan. If your last remaining parent passes away while residing in the home, you, as heir(s), simply pay off your parent’s Reverse mortgage by either refinancing the debt with a new conventional mortgage, selling the house, or paying off the Reverse Mortgage with other assets. If none of the heirs wish to keep the home, when the home is sold, the heirs receive the net proceeds in accordance with your parents’ last wishes.