Reverse mortgages have become popular over the years. Retirees often take out a reverse mortgage after finding out that they didn’t save as much for their retirement as they should have or they had a medical condition that reduced their savings and now they need more money for retirement than they originally planned for. A reverse mortgage is sometimes the only feasible option for retirees who suddenly find themselves strapped for money.

Some retirees who might benefit from a reverse mortgage hesitate to obtain one due to their desire that their homes be left to their kids when they die. As reported in the New York Times, since a reverse mortgage loan must be repaid once the borrower dies, a retiree’s heirs typically end up having to sell the family house.

The Fox Business News website reports that there is an alternative that allows retirees to tap into the equity in their homes and still be in a position to achieve their estate planning goal of passing their home on to their children unencumbered by a financial institution’s lien. That alternative is that, in lieu of parents obtaining a commercial reverse mortgage loan, one or more of their children could privately finance the loan. This private reverse mortgage loan would be secured in the same manner as would a commercial reverse mortgage. The loan could be in the form of a lump sum payment, a line of credit or monthly payments made to one’s parents.

Advantages Of A Private Reverse Mortgage

The advantage of a private reverse mortgage is that retired parents can avoid having to pay lending fees associated with a commercial loan. As noted in an article published in Consumer Reports, typically, the costs associated with an intra-family loan are a fraction of what they would be had the retiree taken out a traditional reverse mortgage loan from an institutional lender. Moreover, after their parents die, the children who made the intra-family loan inherit the house free from an institutional lender’s lien.

Seeking legal advice

If you think that a private reverse mortgage could help you better achieve your estate planning and financial goals, you should speak with an attorney experienced in estate planning. Oncepts Lending and its representatives and affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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