Discussing reverse mortgages with your kids
Many adults feel uncomfortable sharing personal financial information with their offspring, yet it can be important to inform your children about your decision to enter into a reverse mortgage.
How do I talk to my kids about reverse mortgages?
Reverse mortgages can be complicated, and the decision to take one should be a well-considered choice. However, the most difficult part of the process may be the discussion(s) you'll have with family members.
Using the equity in your home to support your life in the way you need (or want) is your decision. Yet, this may run counter to expectations your family has about their futures.
For example, your children may be expecting to inherit your home, or expect to realize the value of your home as part of an inheritance. That you are considering reducing or eliminating this from their future plans could prove contentious, especially since they may also have the future obligation of selling your home to repay the debt you'll incur with any reverse mortgage.
Stand fast, though. It's important to remember at all times that it is your right to do with your money what you wish, just as it is theirs to decide their finances. Having a clear sense of what you intend to do may be crucial to making everyone comfortable with your choice.
It can be helpful to have a working discussion plan in place. For example, you might reveal any impending gap between your income and outgo, how this may worsen in the future as costs rise, and how a regular tenure payment could close this gap.
You might discuss needed updates or improvements to your home, and how a lump-sum draw will allow you to make needed changes so that you can live more comfortably in the home you love… and how this might alleviate potential future burdens on them.
You might note how the use of an HECM line of credit will allow you to address emergent or recurring major expenses or simply provide greater flexibility in your finances.
You should be prepared to discuss and consider alternatives, too, if those are available to you, such as moving to a new home that better suits your current and future needs. Alternately, it may be that your children or other family members have already considered alternatives they might be prepared to discuss or even execute, such as expanding their homes to accommodate you, if needed.
It's also important to consider that there are no restrictions on how reverse mortgage funds can be used. Your choice to use the funds in what others might consider a "frivolous" manner could well be a source of friction. For example, if you have always dreamed of world travel and an HECM can provide you the opportunity to realize this dream; your children may not agree that this is the most useful application of your money, especially if they can identify what they perceive as more pressing current or future needs.
Having a conversation with your kids might surprise, you. Your children may be worried about how you will be able to regularly maintain your home or improve it, and it may be a relief to them that you are taking positive steps to address these things. For example, if your son and daughter-in-law come by regularly to cut the lawn, tend the gardens and clean your home, they may welcome your choice of using these funds to hire landscaping and cleaning services, relieving them of the burden of these tasks. They might urge you on to pursue your dreams of traveling.
Clear goals and considered plans can be helpful in making this conversation go smoothly.
At least a word of caution, though: Some adult children have expectations that the "Bank of Mom and Dad" should always be open to them, and may see your willingness to tap equity in your home as a means to be able to continue to use your wallet for their own means. You may need to resist any such pressure; keep in mind at all times how long it takes to build equity and that once it has been spent, it's gone. These funds are yours and should be used to serve your purposes, but preserving these funds to support your life needs should be the primary goal.
If you are concerned about your parents' retirement finances, it may be necessary to suggest that they consider a reverse mortgage. Review the next article in this section.
Next: Talking with parents about reverse mortgages
Previous: Reverse mortgage technical stuff