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Should You Let Your Kids Know About Your Reverse Mortgage?

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Every family situation is different, but how important is it to let your children know about your reverse mortgage?


A reverse mortgage is a special FHA/HUD program that allows senior homeowners the chance to turn a portion of their home equity into cash without the burden of having to make monthly payments to the lender until the homeowner permanently leaves the home. Reverse mortgages can be ideal for seniors because it can provide them the financial stability and flexibility that they are looking for in their retirement years.

When it comes to reverse mortgages, is it necessary to discuss it with your adult children?

Generally, it is a good idea to let your children know that you are planning to go through the reverse mortgage route. Even if you are not looking for advice or approval from your children regarding your plans, the opportunity to sit with your adult children to discuss your plans may be a good idea, especially when it comes to advising them on what happens to your reverse mortgage after you pass away. However, it depends on the dynamics of your family structure on the decision to discuss your reverse mortgage.

If the senior parents are no longer able to take care of themselves due to health reasons or otherwise, sometimes the adult children are named executor or administrator and will have to understand how the loan works and what to expect from a reverse mortgage.

Unlike traditional home equity mortgages, reverse mortgages do not have a maturity date, but a maturity event. A maturity event is an action that occurs, which can cause the loan to go into repayment status.The loan can go into repayment if any of the following takes place:

  • The last borrower on the loan passed away.
  • The last borrower on the loan moved away.
  • The borrower(s) are not living on the property as their primary residence.
  • The borrower(s) are no longer keeping up with payments on the insurance and taxes on the home.
  • The borrower(s) are no longer keeping up with the maintenance on the home.

When the reverse mortgage goes into repayment status, the heir/children do not inherit the debt. Instead, the home is returned to the lender to satisfy the loan. Heirs can also work with the lender to sell the home, and if the house is sold more than it is worth, then it is possible for the heirs to keep the extra funds.

If your adult children are looking to keep the home in the family, they are able to by paying off the loan. Because a reverse mortgage is a non-recourse loan, your family does not have to worry about paying more than the house is worth.

Reverse mortgages can be resource for seniors with limited income. If you are interested in learning more about this great product, contact a Senior Advisor at 1-888-808-8486.

Image courtesy of [worradmu] / FreeDigitalPhotos.net

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