Tom and Julie were raising their children when their parents began needing more financial help. They wanted to be there for them, of course. But each new request brought another question about what might come next and how far their own household budget could stretch.
Their parents had resources. Much of that money, however, was tied up in the house. Unfortunately, it couldn’t pay a repair bill or cover a monthly shortfall without a way to access it. That uncertainty was creating stress for both generations.
Tom and Julie’s financial professional referred the family to Richard. He then sat down to understand what was happening, what the parents needed, and how home equity might help them become less dependent on their children’s budget.
The house had equity but the payments were adding pressure
In the original transaction, the parents’ home was valued at $750,000. They had a first mortgage of about $100,000 and a $50,000 home equity line of credit approaching its repayment period. Their limited income made the prospect of those payments especially uncomfortable.
Richard arranged a Home Equity Conversion Mortgage, or HECM, that paid off the existing first mortgage and HELOC. Funds remaining after the required payoffs and costs were available through a HECM line of credit for repairs and other unexpected expenses.
That addressed two different needs. Paying off the old loans removed their required monthly principal and interest payments. The available line of credit gave the parents another place to turn when an expense arose. They still owned their home, of course, and their property taxes, insurance and other housing expenses continued, just like with any mortgage.
It changed more than the monthly numbers
For the parents, using their own home equity was preferable to asking their children for money. They could meet needs from a resource they’d built over the years. That gave them a greater sense of independence and reduced a source of worry in the family.
Tom and Julie felt relief, too. They could focus more comfortably on their children and their own household while knowing their parents had a way to address expenses. The financial professional had helped bring the right conversation together, and everyone could see the purpose of the loan.
It didn’t mean the parents would never need another kind of help. Families still show up for one another. But changing how the bills were funded took some pressure off the relationship, which was a meaningful result on its own.
Start the conversation before everyone is stretched
If you’re helping an older parent financially, it can be hard to raise the subject. Nobody wants a family dinner to feel like a budget meeting. You might begin by asking whether there’s a way for their existing resources to do more, so they can stay comfortable without either household feeling squeezed.
For an eligible homeowner age 62 or older, a HECM may provide a way to access home equity while living in the home. Depending on the chosen structure, funds may be available through a line of credit, scheduled payments, or a combination. Richard will look at the existing mortgage and the amount available before discussing what options could provide the best benefit.
He will also explain the costs and the balance over time. Interest and mortgage insurance accrue on the outstanding loan, and borrowers continue to occupy the home as their primary residence, maintain it, and pay taxes, insurance and applicable association charges. Independent counseling with a HUD-approved counselor is part of making an informed choice. With your parent’s permission, their advisor and family can join the conversation.
If supporting your parents is starting to strain your own budget, you don’t have to work through the options alone. Call or text Richard at 404-313-9785, or email richard.mcwhorter@ridgereverse.com. Like Tom and Julie, your family may have a useful resource that deserves a closer look.
Richard W. McWhorter, NMLS 1618644. Ridge Reverse, powered by Amerifund. Equal Housing Opportunity. Information is subject to change. This isn’t an offer of credit or a commitment to secure a loan. Eligibility and terms vary. Case figures reflect a past transaction; current proceeds depend on individual circumstances and program terms. This material isn’t from HUD or FHA and hasn’t been approved by any government agency.