Your parent mentions a reverse mortgage, and your first reaction may be, “Wait. Let’s talk about this.” That’s understandable. You want them to be comfortable, keep their independence, and make a decision they’ll feel good about in the years ahead.
You may also be working from things you heard about reverse mortgages years ago. Before either of you says yes or no, it helps to sit down together and understand what your parent wants to accomplish. Are they hoping to move closer to you, reduce pressure from a mortgage payment, or have money available for improvements and future needs they’d be uncomfortable asking you to help pay for?
Those goals give Richard somewhere useful to begin. He encourages family involvement, with the homeowner’s permission, because good questions make for a better conversation.
A move can mean more than a different address
For an older homeowner, moving closer to family can change everyday life. Visits become easier, the grandchildren are nearby, and a single level home may be more comfortable to manage. But the financial side of the move can give everyone pause.
Your parent may have plenty of equity in the current house yet be reluctant to put most of the sale proceeds into the next one. Taking on a conventional mortgage payment may be just as unappealing. A HECM for Purchase can offer another choice for an eligible buyer age 62 or older: use a substantial cash contribution and an FHA-insured reverse mortgage to buy a new primary residence, with no required monthly principal and interest payment while the loan terms are met.
That may leave more cash available than buying outright. It can give the family a way to discuss a home that better fits your parent’s life, along with the money they’d like to keep available beyond the purchase. The actual figures come from a current illustration.
Ask the questions you came to ask
One of the first is often, “Will Mom still own the house?” Yes. Like any other mortgage, a HECM places a lien on the property; ownership stays with the borrower. And, the remaining equity still belongs to the homeowner.
Another is, “What happens to the home later?” Richard will explain that, too. If the home is sold, the loan is repaid from the proceeds and remaining equity belongs to the homeowner. When the loan becomes due after the borrowers’ deaths, heirs can explore selling the home or keeping it by paying the lesser of the mortgage balance or 95 percent of the home’s appraised value under HECM rules. He will discuss spouse protections and any other residents specifically, rather than leaving those questions for later.
You’ll also want to know what your parent will keep paying. Taxes, insurance, maintenance and applicable association charges continue, and the home must remain their primary residence. The mortgage has costs, and interest and mortgage insurance can increase the balance over time. He will show how those figures fit the benefit your parent is seeking. Independent counseling with a HUD-approved counselor provides another opportunity to ask questions.
Bring the family in early
If you’re the Realtor helping with the move, ask the homeowner whom they’d like involved. A shared call early in the process can be much easier than trying to answer a family member’s questions just before closing. Their advisor can join Richard as well.
If you’re the son or daughter, you don’t need to become a mortgage specialist before helping. Bring your questions and listen to what your parent hopes to gain. He can review the numbers with your family, at a pace that gives everyone room to understand them.
Have a parent considering a move or a reverse mortgage? Call or text Richard at 404-313-9785, or email richard.mcwhorter@ridgereverse.com. Richard can help give the whole family a clearer picture of what’s possible.
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. This material isn’t from HUD or FHA and hasn’t been approved by any government agency.