Reverse Mortgages: A Financial Solution for Those Caring for Aging Parents

Caring for aging parents can be a trying experience. As your parents or aging loved ones become more dependent on other people, you want to try and preserve as much self dignity as possible. Most aging people don't want to spend the rest of their lives in a nursing home and most children don't want to see their parents in one. But what happens when parents need more care than their retirement income and your support can afford?

Reverse mortgages are the alternative to selling the home that your parent's treasure in order to afford care during their elderly years. Reverse mortgages allow your parents to stay in their home for as long as they live and have access to the equity in the home at the same time. If your parents need additional money to cover living expenses or your family needs to find a way to pay for in home health care, reverse mortgages could be the solution.

What are reverse mortgages?
Reverse mortgages aren't loans that your parents will need to pay back. They are more like a line of credit that pays your parents from the equity that they have already earned in their home. The government realizes that many retired and elderly Americans are often cash poor and house rich. They also understand that most elderly and retired people don't have the income to repay a refinance loan or second mortgage. Reverse mortgages allow those over the age of 62 to enjoy the fruits of their own investment while they can.

How are the funds from reverse mortgages paid?
Funds from reverse mortgages can be paid out in monthly installments, a lump sum, or a combination of the two. The most common type of plan is the line of credit where homeowners withdraw money as they need it or in scheduled monthly installments. Among other factors, the amount of the monthly installment that your parents will quality for is determined by the amount of equity owned, current interest rates, and the age of your parents. Also part of the equation are the limits set by the HUD, Fannie Mae, and the Financial Freedom Senior Funding Corporation.

What happens if my parents outlive the payments?
Should your parents outlive their payments, they can remain in their home for the rest of their lives, even though the equity has been paid out. In the case that your parents are fortunate enough to enjoy the entire amount of their home equity during their lifetime, the home is transferred to the bank. If there is unpaid equity, that equity is transferred to the heirs.

For the thousands of families wondering how they will fund their parents retirement years, reverse mortgages can be a viable solution. Many children of aging parents are using their own limited resources to care for aging parents and would be happy to see their parents enjoying a better standard of living rather than receiving the earned equity as a beneficiary. Only you know what is right for you and your family. It's nice to know that if your parents need added financial support during their retirement years, reverse mortgages are a safe and smart option.

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