How To Talk To Your Kids About A Reverse Mortgage

You may be thinking about applying for a reverse mortgage, but you’re worried about how it will impact your children. This is not an uncommon concern; many people considering a reverse mortgage are worried about how this loan will impact the inheritance their children will receive.

Knowing the implications upfront can help you talk to your kids about your reverse mortgage. Chances are, they’ll learn how it benefits them and will support your decision, rather than being skeptical about it.

Family implications

Adult children should be informed when and if you make the decision to get a reverse mortgage. That’s because there are implications for them as well as for you. In the case that you pass away, your loan is transferred to your heirs, and must be paid within a certain timeframe. 

The loan can be paid back in various ways, but in most cases, heirs end up selling the home and use that money to pay off the reverse mortgage. Your heirs could also request up to two 90-day extensions if they are having trouble either selling the home or otherwise paying the loan back.

It's advantageous to get the loan settled as quickly as possible, so letting them know about the it upfront can help prepare them for what to do if the time comes. 

Keep in mind that reverse mortgages are nonrecourse loans, which means that if the loan amount is higher than the home's value, the lender can’t go after your heirs or other assets for repayment. This is an important point to stress with family members: They will never go into debt because of your reverse mortgage.

After the loan payment is settled, any remaining equity will go to your heirs.

Peace of mind

Some borrowers express concern about not leaving the home to their children. But in many cases, kids are more concerned about their parents’ financial security than about inheriting the family home.

Your children can find peace of mind knowing that the reverse mortgage can provide protection in the case of an unforeseen event. For example, if you require surgery or if your home needs a major improvement, like a new roof, you won’t need to rely on your kids to help you pay for these expenses, and similarly they won't be left to wonder whether you're able to afford it. 

Another benefit of the reverse mortgage is that it can be used to pay for care that you might need as you age. A reverse mortgage can provide freedom for your kids, who won't have to drop what they’re doing and care for you.

If you are interested in learning more about how your reverse mortgage will impact your kids, or about how to talk with them about reverse mortgage questions they might have, Reverse.Mortgage and HUD.gov are good places to start.