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Navigating the transition to becoming an adult child and your concerns about the well-being of an aging parent can be difficult. However, healthcare, safety, and financial security are all areas where a candid conversation can make both parties more comfortable.

And for each of those areas, there’s one financial tool that can support your parents’ goals and, in some cases, result in much-needed peace of mind: A Reverse Mortgage/Home Equity Conversion Mortgage (HECM). If you’re interested in learning more, here are some ways to be sure a reverse mortgage is a good fit for your parents’ circumstances.

Ask the Right Questions

First and foremost, any decision to pursue a HECM, often referred to as a reverse mortgage, should be accompanied by a well-informed plan. If you think your parents might benefit from this particular loan program, start by finding out more about their future plans.

Do they want to remain in their current home, or would they prefer to downsize or possibly relocate? Are there any health concerns that could prevent them from living at home in the foreseeable future? How do they hope to spend their time in retirement? How confident are they in their financial stability? These questions can be a starting point for a more detailed discussion regarding the role a reverse mortgage can play going forward.

Remember the Requirements

If their answers make a reverse mortgage seem like a realistic option and something they’re interested in considering, it’s essential they understand the loan’s requirements. In addition to being limited to homeowners over the age of 62, a reverse mortgage comes with several borrower responsibilities.

Chief among these requirements is that the loan will ultimately need to be repaid. This is often accomplished by selling the home once the owners no longer occupy it. In some cases, the estate chooses to repay the loan and retain ownership. In other instances, the lender can foreclose on the property and sell it to recoup the money.

Initially, a reverse mortgage provides homeowners with a substantial portion of their home’s equity while deferring any repayment. During this period, the borrowers must maintain the property in good condition and continue paying any property taxes and insurance premiums to protect the home.

Don’t Leave Anyone Out

Family dynamics can be complicated, so it’s best not to leave out anyone who may be impacted by your parents’ decision to obtain a reverse mortgage. Siblings, loved ones, or other relatives who have a reasonable interest in the future of the property or the wellbeing of your parents will appreciate remaining informed.

It’s also important that all relevant individuals know once a reverse mortgage is in place. If the borrower is incapacitated and can no longer reside at the property. There may be important deadlines to ensure the reverse mortgage is exited appropriately or that a non-borrower can remain in the home.

Learn more about the reverse mortgage options available to homeowners with expert guidance from Open Mortgage. Browse our website or call to speak with an originator today.

Things to know about Reverse Mortgages:
  • At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
  • Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
  • The loan balance grows over time and interest is charged on the outstanding balance
  • The borrower remains responsible for property taxes, hazard insurance, and home maintenance, and failure to pay these amounts may result in the loss of the home
  • Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment
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