No matter how old you get, having financial conversations with your parents can feel a little weird; especially when the roles are reversed and you’re the one leading the discussion. But, if your parents have mentioned wanting to supplement their retirement income, it might be time to strike up a chat about reverse mortgages.
A reverse mortgage (also known as a home equity conversion mortgage—HECM) can help homeowners who are 62 and older access cash flow from a bank or lender based on the equity of their home. Since no payment is due, seniors who choose to get a reverse mortgage can use the funds however they see fit.
Check out these tips on how to talk to your parents about reverse mortgages.
Pick the right time and place
Choosing the right setting can make all the difference when you want to have a conversation with your parents about getting a reverse mortgage. Growing up in my house, there were three things we never talked about in public: gossip, health, and finances. If you parents have a similar philosophy about what to discuss in polite company, you may want to have your reverse mortgage chat with them from the comfort (and privacy) of their own home.
It’s also a good idea to be prepared for your conversation. Your parents will more than likely appreciate some advanced notice that you want to talk about a reverse mortgage with them. Do a little homework on your end so that you can have resources on hand to explain how a reverse mortgage works to your parents. And maybe pick up some coffee and donuts on your way over; if you ask me, talking about money with a parent is always a little easier with caffeine and sugar on hand.
Keep it simple: The ABCs of reverse mortgages
Getting a reverse mortgage is like drawing water from a well. Think of your parents’ home like a well and the water within it their home equity. When the lender makes its monthly payment to your parents, that is like drawing up water in a bucket. However, you can only draw from a well so many times before the water runs out, just like your parents will be paid the amount of equity in the home and not a drop more.
Don’t be surprised if your parents raise questions, especially ones based off of reverse mortgage misconceptions they may have heard. A common mortgage myth that can cause concern for some homeowners is that they could be forced out of their home. This couldn’t be further from the truth. In fact, one of the requirements to get a reverse mortgage is that the loan must be on their primary residence, so it wouldn’t do a lender any good to “force” a resident with a reverse mortgage from the home.
Be sure to talk to your parents about the pros and cons of getting a reverse mortgage too. Some pros include no monthly payment, access to their home equity, and additional income. A few cons could include that heirs may inherit less and getting a reverse mortgage isn’t free. If you want to talk to a mortgage professional about a reverse mortgage, connect with your local PrimeLending loan officer for answers to your questions.
Keep your lines of communication open
Learning about the benefits of a reverse mortgage is probably a new subject for both you and your parents. So, remember that you are in this together and address any of the concerns with empathy. It may be easier to have this conversation when your parents know that you want to make informed choices like this together.
Reach out to your trusted PrimeLending expert for guidance to assure your parents that you have taken this option seriously and want to make sure they are in good hands if they decide to learn more. Follow-up conversations with a reverse mortgage professional can help answer any additional questions they have after your discussion.
Our mortgage experts are always available to help you understand how reverse mortgages work, even on nights and weekends. Connect with your local expert today to learn more.
These are brokered loan products. Not available in the following states: NY, NC, or HI. All credit decisions for brokered loan products will be made by the third-party lender. Restrictions and limitations apply. You must still live in the home as your primary residence, continue to pay required property taxes, homeowners’ insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure. As required by FHA, you will be charged an up-front mortgage insurance premium (MIP) at closing and, over the life of the loan, you will be charged an annual MIP based on the loan balance. Your current mortgage, if any, must be paid off using proceeds from your HECM loan. If your home needs repairs to be eligible for a HECM loan, you may be able to use the proceeds of the loan to accomplish this. Generally, the money received is not considered income and could be tax free, please consult your tax advisor and appropriate government agencies for any effect on taxes or government benefits.
