Give Your Parents the Gift of a Reverse Mortgage
If you have aged parents then you may want to consider giving them the gift of a reverse mortgage. If their home is in an area where house prices are increasing, the scenario is even more attractive and beneficial to your parents.
Reverse mortgages can help your aged parents live a comfortable and stress-free life.
Let us say for instance, your parents’ home is worth about $300,000. If they have an existing mortgage balance of $125,000 then you can give them a personally financed reverse mortgage for this amount and set the interest rate at say 6 percent. The $125,000 will be like a long-term, fixed-rate compound-interest deposit but you would not get any payments of principal or interest on it. That is until the house is sold or your parents pass away. Your parents need not make any payments as long as they are living in the same house. For someone who has the funds to invest and is looking for this type of tax-deferred investment, this may be a smart choice.
It is in your and your parents’ interest to consult with a qualified counselor so all the parties can understand the pros and cons of a reverse mortgage. The reverse mortgage may be a good program that a son or daughter can use to give peace of mind his senior parents.
Generally people considering a reverse mortgage, meet a reverse mortgage counselor or lender to fully discuss the option. It is also advisable to meet with a tax attorney to fully understand the tax consequences and to prepare the promissory note and the reverse mortgage document.
If you alow your parants to get a reverse mortgage loan, then they can enjoy monthly incomes from the lender while continuing to live in the same home. When they sell or move from that home, that principal and interest needs to be repaid to the lender. Or, if they die, then the lender will need to sell the home and recover the money, unless the heirs pay off the dues so they can keep the home for themselves.
