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How to Secure Reverse Mortgage Loans for Eligible Parents

Cash-strapped seniors have the option of securing a reverse mortgage to fund their retirement. This type of loan allows the elderly to access their home’s equity to establish a “rainy day” fund, supplement income, or meet other financial goals.

If you think that your parents can benefit from this type of loan, you should follow a few steps to ensure they get the best terms. Below you will learn how family members can help their aging parents secure a reverse mortgage.

Reverse Mortgage Calculator

Get the desired amount as a line of credit or a lump sum. Our reverse mortgage calculator utilizes three key variables - estimated home value, remaining loan amount, and age of the homeowner - to determine how much tax-free cash you can access. By inputting these variables into the calculator, you can get an estimate of the potential funds that may be available to you through a reverse mortgage.

Please update the values in the form
and click calculate.

Check Your Reverse Mortgage Eligibility

Learn About the Loan Requirements

Not everyone is eligible for a reverse mortgage. Some of the personal requirements that candidates must fulfill include:

  • The borrower must be over the age of 62 and have their names on the home’s title. If they do not outrightly own the home, they must have at least 50% equity. Note that the older you are, the more funds you can receive.

  • Your parents must commit to living in their home as the primary residence.

  • Borrowers should also show willingness and financial ability to meet the loan obligations, including paying insurance, property tax, and keeping up with home repairs and maintenance.

Attend a Counselling Session

Before signing up for a reverse mortgage deal, attending counseling sessions from government-approved agencies is crucial. Reverse mortgage counselors will evaluate the mortgage, pointing out the pros and cons.

They also screen for private and public benefits that can help the elderly pay for bills such as medication, meals, and home energy.

The counselors have also been known to connect seniors to services that can help them stay independent for longer. Counseling can either be in person or over the phone. After finishing the counseling sessions, seniors receive a certificate.

The professionals help individuals understand all the options they have so that they do not get a reverse mortgage blindly. Counselors can also use a financial interview tool to cover considerations and needs.

Portrait of happy multi generation family standing outdoors

Find a Reputable Company that Facilitates Family-Funded Reverse Mortgages

If getting a reverse mortgage is the best option for your aging parents, it is now time to find a reputable company that will offer the loan.

Always shop around to get the best available deals. Start by comparing the types of loans available to identify the most suitable option. It’s also advisable to compare fees, terms, and other options from different lenders.

Ask as many questions as you would like to know exactly what you are getting into. Be careful about sales pitches for reverse mortgages, as this may land you into financial trouble.

Where possible, scan for reviews from other clients to know how their experience was with the lender. It can help you know the companies to consider and avoid for peace of mind and great services.

Agreeing to the Terms of the Loan

Once you land on the ideal lender, the next step is to agree to the loan terms. It primarily involves knowing the total loan amount and the interest rate at which it will be paid off.

Note that US tax law plays a significant role in the interest rates picked. The interest rates must meet or exceed IRS Applicable Federal Rate.

It is also important for the family to settle on how the loan will be disbursed to the parents. Discuss whether it will be better for the seniors to get monthly payments, receive a lump sum once, a line of credit to draw from when and if needed, or a combination of the options.

Most people usually start with a large lump sum payment and then switch to making payments monthly. You will also need to decide the measures that will be put in place in case of an emergency.

Avoid Reverse Mortgage Scams

While shopping around for a reverse mortgage, there are two major scams to look out for and avoid:

  • Veteran “loans” - note that the Department of Veterans Affairs does not offer any reverse mortgages. You may, however, see adverts promising veterans special deals like free reverse mortgages to attract unsuspecting individuals.

  • Contractor “loans” - Some contractors will try and trick borrowers into getting a reverse mortgage as they tout home improvement services.

Continually Track the Loan

Proper tracking of loan disbursements, as well as the accumulation of interest, is crucial. Both the borrower and the lender must comply with the terms of the loans and account for the loan appropriately at tax time.

The lender should track and document cash disbursements via an accounting ledger with notes, receipt copies, and banking statements. These documents will come in handy when you want to defend the right to principal repayment.

It is the only way to prove actual cash disbursement. You can opt to do this on your own or hire a financial professional or attorney to assist.

Closing Thoughts

Family-funded reverse mortgages are a great option for seniors who own a home but have little savings.

Family members come in to help their parents identify a great lender that will enable them to enjoy the retirement they deserve.

Find The Right Mortgage

For more than 20 years, Phil have been helping customers achieve their home purchase and refinance goals by providing them with invaluable resources and support.

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Phil Ganz

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