Is a reverse mortgage a good idea for your parents?
May 22, 2012, 12:54 p.m.
Many baby boomers face the challenge of simultaneously trying to take care of their children and their aging parents. This economy has been rough the past few years and has been draining retirement savings; boomers are feeling the pinch. Many are also helping their aging parents with monthly expenses.
Fortunately this older generation of Americans has wealth in the form of home equity. Unfortunately, few in this generation are aware of the benefits of a reverse mortgage (www.onereversemortgage.com). If your parents are struggling to meet monthly expenses or health expenses, a reverse mortgage may help. Here are some facts and suggestions for talking to your parents about a reverse mortgage.
Explain the program
Your parents may not be familiar with the program. The first thing you want to do is explain what a reverse mortgage is. So what is a reverse mortgage? A Reverse Mortgage (www.onereversemortgage.com) is a financial tool that allows people over 62 who own their homes to access the equity they have built up in their homes. It eliminates the current monthly mortgage payment and gives them cash to use any way they want. There are currently no income or credit requirements. The only requirements are that they use the home as their primary residence, they are at least 62 years old, and they have sufficient equity in their home.
Reverse Mortgage Facts and Fictions
Next you’ll want to dispel some misconceptions about reverse mortgages. There are many misconceptions about reverse mortgages (www.onereversemortgage.com). Addressing them will help your parents understand the risks and benefits.
One of the biggest revere mortgage misconceptions is that the bank owns the home. That is simply untrue. The title of the home will still be in your parents’ name; the bank won’t own it.
Another common misconception about reverse mortgages is that you may end up owing more than the home is worth. A reverse mortgage is known as a “non-recourse” loan, which means that the lender cannot demand a larger amount than the value of the home at the time of disposition. In fact, most family members can purchase the property from the lender for the current loan balance or 95% of the current appraised value—whichever is less.
Here are some additional facts:
• A reverse mortgage does not affect your parents’ Social Security or Medicare benefits. It can affect SSI or Medicaid under some circumstances, but not Social Security or Medicare.
• Reverse mortgage lenders do not consider credit scores (www.quizzle.com/)or income when they review your parents’ application. You can get a reverse mortgage with bad credit and no income.
• Your parents can still leave their home to you or to anyone they choose to.
• Your parents can receive payment in a lump sum, monthly cash payments, a line of credit or a combination.
Let other family members know the conversation is happening. Letting family members know that your parents need some financial help will help avoid hard feelings down the road and also and give you the opportunity to answer questions that they may also have about the reverse mortgage.