Reverse Mortgage : Are they making the right choices?
Adult children of 'Baby Boomer' generation parents, most of you are now in the age range where your parents are retired or retiring and making financial choices for their golden years.
Those decisions can be confusing and often affect the children. That impact can be positive or negative, depending on choices made with financial planning.
One of the largest of those choices, and one that carries the most impact, is the home and mortgage. Here's what you need to know about Reverse Mortgage to help them make a sound decision for their future - and yours.
They helped you make better choices in your youth (hopefully) - here's how you can help them make better choices now...
Reverse Mortgage Questions to Ponder
1. Do I have the financial resources to help my parents with their medical and living expenses?
2. Is there a concern from other siblings as to inheriting the home or the equity?
3. What are my parents' wishes as to staying home if medical care is needed for an extended time?
Common Concerns about Reverse Mortgage
Will Mom and Dad use up my inheritance?
While tapping into their equity, your parents' home may be appreciating in value, which could allow for some equity left at the end of the loan. They are also able to live comfortably without having to depend upon family members to support them.
Will the bank take their home on a reverse mortgage?
No, the bank will not take their home. Throughout the life of the reverse mortgage, your parents will continue to own their home and retain title.
How much money will they owe when the reverse mortgage has to be repaid?
Your parents will owe the total amount borrowed, accrued mortgage insurance premiums, accumulated interest, servicing fees, and any other costs and fees financed through the reverse mortgage amount.
How do my parents repay a reverse mortgage?
There are three viable options for your parents. They can sell their home to repay the lender and collect the proceeds, choose to reimburse the lender directly from a personal account, or refinance the loan.
What happens to the equity if my parents or I decide to repay the reverse mortgage by selling the house?
There are two options. Either your parents or the heirs can keep the home and pay the balance due on the reverse mortgage, or they can decide to sell the home and use the proceeds to pay off the reverse mortgage. Either way, the remaining equity is retained by the owners or heirs.
What happens to my mom and dad's house on a reverse mortgage if they move into a senior care facility?
A reverse mortgage becomes due and payable when the last borrower moves out of his or her home permanently. For instance, moving into a senior care facility, selling the home, passing away or moving in with the children.
What happens if the loan balance becomes greater than the value of the home?
The Home Equity Conversion Mortgage (HECM) is a non-recourse loan, which means that the borrower can never owe more than what the house is worth. As HECM borrowers, your parents pay a mortgage insurance premium to the U.S. Department of Housing and Urban Development (HUD). They, in turn, guarantee that the borrower will never owe more than the value of their home when the loan becomes due and payable.
What are the risks my parents would be taking in receiving a reverse mortgage?
A reverse mortgage doesn't affect regular Social Security or Medicare benefits. To find out if it impacts other federal or state assistance or medical programs, contact your reverse mortgage lender, tax attorney, or counseling agency.
Are there restrictions on how my parents spend their money from a reverse mortgage?
Your parents can spend their money any way they want. Borrowers have used reverse mortgages to pay for grandchildren's educations, vacations, new cars, home improvements or to eliminate debts. The money can be used for anything they desire.
Is there any information that provides what all of the reverse mortgage fees will be?
The lender is required to provide your parents with the Total Annual Loan Cost, or "TALC" disclosure, which is required by the Federal Reserve Board. The TALC displays the total transaction costs over the projected life of the loan, which will allow your parents to see all costs related to the reverse mortgage.
How do I select a loan officer to take care of my parents' reverse mortgage?
You may run into or interview several loan officers who say they can handle a reverse mortgage transaction for you. Truth of the matter is, reverse mortgages are complex and require a bit more detail. You should only use a loan officer who has gone through reverse mortgage training and certification. This will help ensure your parents are in qualified hands.
For more information from a Certified Reverse Mortgage Planner, fill out the form below and we will contact you as quickly as possible.
Certified Reverse Mortgage Planner
Fairway Independent Mortgage Corp.
NMLS ID 856816
55 N. Arizona Place
Chandler, Arizona 85224
About Fairway Independent Mortgage Corporation
Founded in 1996 by CEO Steve Jacobson, Fairway Independent Mortgage Corporation is a Top 10 ranked national mortgage lender. The company has more than 250 locations including several Arizona Mortgage Branches. At Fairway, customer service is a way of life. At Fairway speed of response is the goal, with some of the fastest turn times in the industry. The goal is to act as a trusted advisor, providing highly personalized service and helping through every step of the loan process. It’s all designed to exceed expectations, guarantee satisfaction and earn trust. For more information on Fairway Mortgage Arizona, please visit our website at www.FairwayArizona.com.