Advice for Children of Seniors

 

Paying for Caregiving: Strategies for Managing the Costs of In-Home Care

Are your parents in need of home care?

Watch this webinar featuring experts from the Long Island Aging in Place Council, Square Care, and the National Reverse Mortgage Lenders Association who explain options and resources including: Medicare, Medicaid, veterans benefits, private insurance, state and local programs, and the equity older adults have built up in their homes.

Should Mom or Dad Get a Reverse Mortgage? A Guide for Families

If you’re part of the “sandwich generation,” you may be juggling college costs for your kids while also worrying about aging parents. Rising expenses, uncertain home values, and market ups and downs can make it harder to feel confident about your parents’ long-term financial security—even if they planned carefully for retirement.

For many older Americans, most of their wealth is tied up in their home. When monthly bills, medical costs, or other expenses become harder to manage, tapping into home equity may be an option worth exploring. One way to do that is with a reverse mortgage.

Deciding whether a reverse mortgage makes sense is a personal family decision. Your parents will likely want your input, so here’s a clear, consumer-friendly overview of what you should know.

What Is a Reverse Mortgage?

A reverse mortgage is a loan available to homeowners age 62 and older (some private options start at age 55). It allows homeowners to convert part of their home equity into cash.

It’s called a “reverse” mortgage because the usual payment flow is reversed. Instead of your parents making monthly payments to a lender, the lender pays them.

How Do People Use Reverse Mortgages?

Reverse mortgages were designed to help retirees:

  • Pay off an existing mortgage or other debts

  • Cover everyday living expenses

  • Pay for healthcare or long-term care needs

There are no restrictions on how the money must be used. Many homeowners also use reverse mortgages as part of a broader retirement plan to increase financial flexibility and peace of mind.

Will a Reverse Mortgage Increase Monthly Expenses?

No monthly mortgage payments are required. Your parents don’t repay the loan until the home is sold or they permanently move out.

They do need to stay current on:

  • Property taxes

  • Homeowners insurance

  • Condo or HOA fees (if applicable)

Does the Bank Own the Home?

No. Your parents keep ownership and title to their home. The lender never owns the property—even when the loan eventually comes due.

How Much Money Can They Receive?

The amount depends on:

  • The age of the youngest borrower

  • The home’s value

  • Interest rates

  • Loan fees

Generally, the older the borrower, the more funds they may qualify for.

Funds can be received as:

  • A lump sum

  • A line of credit

  • Monthly payments (for a set period or as long as they live in the home)

  • Or a combination of these options

What Does a Reverse Mortgage Cost?

Many of the same fees charged for a traditional mortgage apply, such as appraisal and closing costs. These fees can usually be paid out of the loan proceeds, minimizing out-of-pocket expenses.

Over time, the loan balance grows because interest and mortgage insurance are added. When the loan is repaid, the balance may be more than what was originally borrowed.

A simple way to think about it:

  • A traditional mortgage balance shrinks over time

  • A reverse mortgage balance grows over time

Could the Loan Balance Ever Exceed the Home’s Value?

Yes—but your parents (or their heirs) will never be responsible for paying more than the home’s value. Reverse mortgages are non-recourse loans.

If the loan balance exceeds the home’s appraised value when it’s sold, FHA insurance covers the difference—not the family.

What Are My Parents’ Responsibilities?

To keep the loan in good standing, your parents must:

  • Use the home as their primary residence

  • Pay property taxes, insurance, and required fees

  • Maintain the home and complete any required repairs

If someone lives in the home but is not a borrower (such as an adult child), it’s important to understand what happens when the homeowner permanently leaves the property. These situations should be discussed with a reverse mortgage professional before closing.

Can a Reverse Mortgage Help with Downsizing?

Yes. Some seniors use a reverse mortgage to buy a new home that better fits their needs.

With a HECM for Purchase, your parents can combine:

  • Proceeds from selling their current home

  • Savings or gift funds

  • Reverse mortgage proceeds

The result: purchasing a new home outright with no monthly mortgage payments.

How Can My Parents Learn More?

Start by contacting a reputable reverse mortgage lender. It’s strongly recommended to work with a lender who is a member of the National Reverse Mortgage Lenders Association (NRMLA).

Use NRMLA’s “Find a Lender” tool to locate a trusted professional in your state and help your parents make an informed decision.