Should Your Parents Consider A Reverse Mortgage?
Are your parents struggling to make ends meet with their retirement income? Many homeowners are taking advantage of reverse mortgages as a means of being able to live more comfortably during their retirement years. A reverse mortgage offers individuals aged 62 or older to tap into the equity in their homes as a means of supplementing their monthly incomes.
Getting a reverse mortgage does not involve selling the home, nor does it require the homeowner to take on a new monthly payment. With a reverse mortgage, instead of the homeowner paying the lender, the lender pays the homeowner. Reverse mortgages can come in very handy for helping with day-to-day living expenses, as well as with unexpected and emergency expenses.
Your parents could receive additional income each month with a reverse mortgage. Some individuals opt to receive their reverse mortgage payments in a lump sum instead of monthly payments, and others choose to set their funds up so they can simply draw against them as needed. A reverse mortgage can help with daily living expenses, or with the unexpected such as medical bills or emergencies such as car or home repairs.
Reverse mortgages are available for individuals who still have a mortgage on their homes, but are best used in situations in which a homeowner has outright title to his or her dwelling. When there is no prior debt on the home, homeowner is able to draw against the full value of their real estate.
Reverse mortgages are still loans, and do have to be paid back. If your parents were to move out of the home, sell their home, or pass away, the loan would have to be repaid in full. Assuming the home sells for the amount owed, or more, the loan is simply repaid from the proceeds. The element of risk comes in here. If the home sells for less money than is owed on the reverse mortgage, alternative arrangements will have to be made for repaying the remainder of the loan.
For individuals in the right situation, reverse mortgages are an ideal solution to post-retirement living. For individuals who plan to sell their home within a few years, it may not make financial sense to take out a reverse mortgage due to the upfront costs. However, if you are parents are in good health and plan to stay in their home for the rest of their lives, a reverse mortgage may be a great solution for supplemental income.
Your parents probably worked very hard to build equity in their home, so it is good to know that they have an option to put that equity to use during their retirement years. The decision about a whether or not a reverse mortgage is right for your parents lies with them. It isn’t your decision, but by becoming knowledgeable about how reverse mortgages work, you can be of great assistance to them as they investigate their options and make their final decision. It is also a good idea to get them to do some research before speaking to a mortgage broker or bank about their options.