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| Reverse Mortgages: How They Work |
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Reverse Mortgages: How They Work If your parent is at least 62 years old and owns their home, you may be able to get a reverse mortgage to help with the cost of their care. Since the home is typically the biggest financial asset, it may make sense to use it to pay for care. The reverse mortgage works is a kind of home equity loan. It's a way to release the value tied up in the home. Unlike a regular mortgage that requires monthly payments to the mortgage company, the lender gives the homeowner the money. It can be structured either as a lump sum or a "line of credit". The "line of credit" type allows you to pull out money as you need it up to a maximum amount. The older the homeowner is, the more money the bank is likely to lend you. The loan does not have to be paid back until the owner permanently vacates the property. This typically means they have died or moved to another location like the home of an adult child, an assisted living facility or a nursing home. In the past, reverse mortgages were not something I'd recommend. The amounts that could be borrowed were lower and the interest rates high. As the reverse mortgage industry gained more experience, it became more "consumer friendly". Instead of letting the money remain tied up in the home, you can put it to use keeping your parents more independent and in their home longer. Depending on your parent's situation, a reverse mortgage could be a valuable tool to pay for the care required. They've worked all their life to pay off their home. It may be time to let that home take care of them now. |